Earnings manipulation and incentives in firms, Issue 4861
Centre for Economic Policy Research, 2005 - Business & Economics - 26 pages
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aggregate performance asymmetric information auditors bargaining blow the whistle CEPR Discussion Paper choose Coca Cola companies compensation contract corporate govemance corporate hierarchy corporate scandals cost of effort costs of earnings decrease distorted division managers division output earnings manipulation effort level Email Enron equilibrium euros per person exert effort firm's flat hierarchies flatter hierarchies Guido Friebel Hence high effort higher implicit cost incentive compatibility incentives to manipulate inflate earnings initial shareholders internal incentives investors are overconfident Jean Tirole limited liability literature long-term incentives Luigi Zingales Maclean and Elkind Management manipulated earnings market value monitor moral hazard optimal overconfident investors overreporting payoff potential whistle-blowers rational investors reported earnings role Sarbanes Oxley Sarbanes-Oxley Sarbanes-Oxley Act Section Sergei Guriev share Sherron Watkins short-term incentives propagate side-contracting stock options surplus tax enforcement tax rate threat of whistle-blowing threat to blow true value value creation weaker incentives www.cepr.org Zingales