On the Tension between Full Revelation and Earnings Management: A Reconsiderastion of the Revelation Principle

Tavy Ronen, Varda Yaari

Research output: Contribution to journalArticlepeer-review

3 Scopus citations

Abstract

We challenge the popular view that because of the revelation principle, the research on earnings management must be restricted only to situations in which a truth-telling, fully revealing equilibrium/i> does not exist. After presenting and discussing the revelation principle, we state conditions under which truth-telling equilibria may be dominated by equilibria wherein the message (such as earnings) is managed. The optimal message in an undominated equilibrium may involve either partial suppression of information (omission of some data) or aggregation (summarization of data).

Original languageEnglish
Pages (from-to)273-294
Number of pages22
JournalJournal of Accounting, Auditing and Finance
Volume17
Issue number4
DOIs
StatePublished - 1 Jan 2002

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics, Econometrics and Finance (miscellaneous)

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