Year: 2018
Type: article
Abstract: Building on the idea that accounting matters for corporate governance, this paper studies the equilibrium interaction between the measurement rules that firms find privately optimal, firms’ governance, and the liquidity in the secondary market for their assets. This equilibrium approach reveals an excessive use of market-value accounting: corporate performance measures rely excessively on the information generated by other firms’ asset sales and insufficiently on the realization of a firm’s own capital gains. This dries up market liquidity and reduces the informativeness of price signals, thereby making it more costly for firms to overcome their agency problems. (JEL D21, D82, G34, G38, M41, M48)
Source: American Economic Review
DOI: 10.1257/aer.20161749
Authors: Guillaume Plantin, Jean Tirole
Language: English
Subfield: Accounting
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2298406488