Property rights and earnings manipulation

Miglo, Anton (2009) Property rights and earnings manipulation. International Research Journal of Finance and Economics, 31. pp. 116-128. ISSN 1450-2887


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Existing literature on property rights stresses the effect that
distortions in future investment decisions have on establishing the optimal property rights. This paper demonstrates that property rights may also
be affected by contracts which exist prior to the establishment of property rights. We consider a two-period model where a fi�rm�'s claimholders have contracts on current earnings and must determine the allocation of property rights on the �firm�'s residual assets. The allocation of these rights affects the claimholders' �incentives to undertake optimal fi�nancial decisions which
simultaneously affects current cash fl�ows and the fi�rm'�s residual value. We argue that property rights should be connected to the existing contracts through the rule of marginal revenues in order to mitigate the intertemporal
substitution (earnings manipulation) problem.

Item Type: Article
Date: 2009
Subjects: L100 Economics
N100 Business studies
N200 Management studies
N300 Finance
Divisions: Faculty of Business, Law and Social Sciences > Birmingham City Business School > Department of Accounting, Finance and Economics
Depositing User: Anton Miglo
Date Deposited: 15 Aug 2018 09:04
Last Modified: 23 Sep 2020 10:36

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