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 benefits blow the whistle CFO Magazine choose companies compensation contract corporate governance corporate hierarchy corporate scandals corporate tax cost of effort cost of manipulation costs of earnings Cy_x Discussion Papers distorted division managers division output division's earnings manipulation effort level Email Enron equilibrium ex post exert effort firm's flat hierarchies flatter hierarchies gatekeepers 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 Luigi Zingales Maclean and Elkind Management manipulated earnings market value misreporting monitor optimal overconfident investors overreporting payoff potential whistle-blowers Povel receive reported earnings risk of whistle-blowing role Sarbanes Oxley Sarbanes-Oxley Act Section share Sherron Watkins steeper hierachies stock options subordinates surplus tax enforcement theory threat of whistle-blowing threat to blow top management top management's value creation weaker incentives www.cepr.org Zingales