Overstatement and Rational Market Expect

• 영문명: Overstatement and Rational Market Expect
• 발행기관: 한국계량경제학회
• 저자명: Illoong Kwon Eunjung Yeo
• 간행물 정보: 『한국계량경제학회 학술대회 논문집』2007년 하계학술대회, 1~39쪽, 전체 39쪽
• 주제분류: 경제경영 > 경제학
• 파일형태: PDF
• 발행일자: 2007.08.30

영문 초록

When an agent overstates his/her true performance, a rational market can simply recalibrate or discount the reported performance, and correctly guess the true performance. This paper shows, however, that such rational market discounting leads to less productive effort by the agent and less performance-pay by the principal. Therefore, a rational market and a profit-maximizing principal can exacerbate the lack of productive effort by the agent. Antifraud legislation that raises the marginal cost of overstatement, however, is shown to decrease the overstatement and increase the productive effort at the same time. Using Dow Jones Industrial firms data, this paper also shows that the elasticity of stock prices to earnings reports increases in the performance-pay, as predicted by the model.

목차

1 Introduction

2 The Model

3 Rational Market Expectation and Optimal Contract

4 Empirical Analysis

5 Discussion

키워드

overstatement rational expectation earnings management