Miglo, A. (2010) Capital structure and earnings manipulation. Journal of Economics and Business, 62(5), pp. 367-382. (doi: 10.1016/j.jeconbus.2010.05.001)
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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: | Articles |
|---|---|
| Status: | Published |
| Refereed: | Yes |
| Glasgow Author(s) Enlighten ID: | Miglo, Dr Anton |
| Authors: | Miglo, A. |
| College/School: | College of Social Sciences > Adam Smith Business School > Accounting and Finance |
| Journal Name: | Journal of Economics and Business |
| Publisher: | Elsevier |
| ISSN: | 0148-6195 |
| ISSN (Online): | 1879-1735 |
| Published Online: | 26 May 2010 |
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