Optimal Accounting Rules, Private Benefits of Control, and Efficient Liquidation

• 成果类型: Article
• 署名作者: Jiang, Xu; Yang, Ming
• 署名单位: Duke University; University of London; University College London; University of London; University College London
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2019.03087
• 发表日期: 2024
• 页码: 6302-6314
• 关键词: optimal accounting rules; Private benefits of control; accounting conservatism; information design; Bayesian persuasion

摘要

We study optimal accounting rules that alleviate inefficiencies caused by managerial private benefits. Accounting signals generated by the accounting rules guide the continuation decision at an interim project stage. The entrepreneur enjoys private benefits from continuation, which may induce inefficient decisions. The optimal accounting rule is characterized by a threshold, with a higher threshold representing more conservative accounting. The first-best is achieved under small private benefits. As private benefits increase, the first-best eventually is not achievable and more informative bad news is required for the manager to terminate, resulting in less conservative accounting rules. Therefore, more conservative accounting rules are associated with more efficient investment decisions.