Microstructure of firms' disclosure

Joseph Tzur; Varda Yaari

doi:10.1023/A:1008393707313

Microstructure of firms' disclosure

Joseph Tzur, Varda Yaari

Research output: Contribution to journal › Article › peer-review

2 Scopus citations

Abstract

Because of imperfections in auditing technology, firms can successfully misrepresent financial reports. We offer a new mechanism, a "sunshine rule," by which firms are required to publicize a management draft prior to the audited reports. If the final reports are materially different from the management's draft, the market penalizes both the firm and the manager. The proposal's effectiveness in eliminating "earnings management," increasing the quality of the financial reports, and reducing the cost of the manager's incentives is illustrated in signaling games with perfect and imperfect information and a principal-agent model with perfect information.

Original language	English
Pages (from-to)	367-391
Number of pages	25
Journal	Review of Quantitative Finance and Accounting
Volume	13
Issue number	4
DOIs	https://doi.org/10.1023/A:1008393707313
State	Published - 1 Jan 1999
Externally published	Yes

Keywords

Disclosure
Mechanism design
Principal-agent
Signaling

ASJC Scopus subject areas

Accounting
General Business, Management and Accounting
Finance

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KW - Principal-agent

KW - Signaling

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Microstructure of firms' disclosure

Abstract

Keywords

ASJC Scopus subject areas

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