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
Dates:	Date Event 4 May 2010 Accepted 2010 Published
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
Divisions:	Business School > Accountancy, Finance and Economics Business School > Management, Business and Marketing Law and Social Sciences > Criminology and Sociology > Criminology Law and Social Sciences > Criminology and Sociology > Sociology
Depositing User:	Anton Miglo
Date Deposited:	15 Aug 2018 09:03
Last Modified:	04 Aug 2025 13:01
URI:	https://www.open-access.bcu.ac.uk/id/eprint/6241