Introduction to linear and nonlinear programming

http://public.kenan-flagler.unc.edu/faculty/bushmanr/bushman-smith.pdf

Financial accounting information and corporate governance

The financial reporting environment: Review of the recent literature

http://directory.umm.ac.id/Data%20Elmu/jurnal/J-a/Journal%20of%20Accounting%20and%20Public%20Policy/Vol19.Issue4-5.2000/6060.pdf

Research design issues in earnings management studies

Compared to non-family firms, family firms face less severe agency problems due to the separation of ownership and management, but more severe agency problems that arise between controlling and non-controlling shareholders. These characteristics of family firms affect their corporate disclosure practices. For S&P 500 firms, we show that family firms report better quality earnings, are more likely to warn for a given magnitude of bad news, but make fewer disclosures about their corporate governance practices. Consistent with family firms making better financial disclosures, we find that family firms have larger analyst following, more informative analysts' forecasts, and smaller bid-ask spreads.

https://papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID897817_code59239.pdf?abstractid=897817&mirid=1&type=2

Corporate Disclosures by Family Firms

When the Revelation Principle (RP) holds, managing earnings confers no advantage over revelation. We construct an explanation for earnings management that is based on limitations on owners' ability to make commitments (a violation of the RP's assumptions). Traditionally, earnings management is seen as sneaky managers pulling the wool over the eyes of gullible owners by manipulating accruals; our limited commitment story suggests that the owners, too, can benefit from earnings management. We categorize a variety of extant explanations of earnings management, along with our own, according to which of the assumptions of the RP each explanation violates. Plausibility of multiple simultaneous violations of the assumptions, and strategic use of various accounting and real instruments of earnings management, complicate the task of detecting such management in field data. When managers choose accounting accruals, neutral communication of the firm's under- lying economic reality to the readers of financial reports is not necessarily their only goal. This goal can become enmeshed with managers' desire to use financial reports, especially earnings, opportunistically to serve their own personal ends. The existence of such mixed motives in managers has given rise to hypotheses about management (or manipulation) of earnings, theoretical analyses of the interaction between the two motives for such manage- ment, and an empirical literature that attempts to identify and document this phenomenon. The purpose of the paper is twofold. First, we suggest earnings management is more than just sneaky managers pulling the wool over the eyes of gullible owners. Manipulation can be in the best interests of owners. 1 In particular, we study a setting in which the ability of owners to make binding commitments is constrained. Earnings management is useful because it reduces owner intervention. Although such management is not in the best interest of owners ex post (when the earnings report is submitted), it is in their best interest ex ante (when they are trying to induce the manager to join the firm and exert effort to benefit the firm). Economic explanations for earnings management require one or more of the assumptions of the Revelation Principle (RP) to be violated (Dye, 1988). The RP states that any equi- librium outcome of any mechanism, however complex, can be replicated by a truth-telling equilibrium outcome of a mechanism under which the agents are asked to report their pri- vate information to the principal (see, for example, Myerson (1979)). Hence, when the RP holds, the performance of any mechanism under which managers manipulate earnings can be replicated by a mechanism under which managers report earnings truthfully. 2 As Dye

Earnings Management and the Revelation Principle

SYNOPSIS: The push for increased transparency in financial reporting and corporate governance serves shareholders only up to a point. The problem of assessing the value of transparency to shareholders is subtle because both the level and pattern of earnings can convey information. Even when earnings management conceals information, it can be beneficial to shareholders. Distinguishing between ex ante and ex post efficiency underscores the advantages of achieving a balance between transparency and privacy in corporations.

/pdf/are-unmanaged-earnings-always-better-for-shareholders-16qsgetflf.pdf

Are Unmanaged Earnings Always Better for Shareholders

Teams, repeated tasks, and implicit incentives

In this article, we explore the connection between information system design and incentives for project search. The choice of an information system affects the level of managerial slack that is generated during project implementation. Whether slack is beneficial or costly to an organization has been the subject of debate. In our model of the hold-up problem in capital budgeting, there are both costs and benefits to having managerial slack. The cost of slack is the consumption of perquisites by the manager. The benefit of slack is that it can serve as a motivational tool. The possibility of increasing his slack may encourage a self-interested manager to conduct a more diligent search for a profitable project. To trade off the costs and benefits of slack in our model, an optimal information system sometimes incorporates coarse information, late information, and a mix of monitored and self-reported information. These features are familiar to accountants. Accounting incorporates both verified (monitored) and unverified (self-reported) information and provides information that is aggregated (coarse) and historical (late).

Jonathan Glover

Papers

Earnings Management and the Revelation Principle

Are Unmanaged Earnings Always Better for Shareholders

Teams, repeated tasks, and implicit incentives

Capital Budgeting, the Hold-up Problem, and Information System Design

Unintended consequences of regulating disclosures: The case of Regulation Fair Disclosure