Capital structure and earnings manipulation
Miglo, Anton (2010) Capital structure and earnings manipulation. Journal of Economics and Business, 62 (5). pp. 367-382. ISSN 0148-6195
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Abstract
We consider an optimal contract between an entrepreneur and an investor, where the entrepreneur is subject to a double moral hazard problem (one being the choice of production effort and the other being earnings manipulation). Since the entrepreneur cannot entirely capture the results of his effort, investment is below the optimal level and production effort is socially inefficient. The opportunity to manipulate earnings protects the entrepreneur against the risk of a low payoff when production is unsuccessful. Ex-ante, this provides an incentive for the entrepreneur to increase investment and improve effort.
| Item Type: | Article | ||||||
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| Subjects: | CAH15 - social sciences > CAH15-02 - economics > CAH15-02-01 - economics CAH17 - business and management > CAH17-01 - business and management > CAH17-01-02 - business studies CAH17 - business and management > CAH17-01 - business and management > CAH17-01-04 - management studies CAH17 - business and management > CAH17-01 - business and management > CAH17-01-07 - finance CAH17 - business and management > CAH17-01 - business and management > CAH17-01-08 - accounting |
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| Divisions: | Faculty of Business, Law and Social Sciences > Birmingham City Business School | ||||||
| Depositing User: | Anton Miglo | ||||||
| Date Deposited: | 15 Aug 2018 09:03 | ||||||
| Last Modified: | 22 Mar 2023 11:49 | ||||||
| URI: | https://www.open-access.bcu.ac.uk/id/eprint/6241 |
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