BA532: PhD Seminar in Accounting Theory
Fall 2009, Fuqua
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Instructor
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Qi Chen
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Office
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A438
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email
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qc2@duke.edu
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Phone
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919-660-7753
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Schedule: (location: Fuqua DeSanctis
Seminar Room)
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Class #
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Date
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Day
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Time
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1
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8-25-2009
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Tuesday
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6:00-9:00pm
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2
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8-28-2009
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Friday
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1:30-4:30pm
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3
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9-1-2009
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Tuesday
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6:00-9:00pm
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4
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10-6-2009
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Tuesday
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6:00-9:00pm
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5
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10-9-2009
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Friday
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1:30-4:30pm
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6
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10-13-2009
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Tuesday
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6:00-9:00pm
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7
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10-20-2009
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Tuesday
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6:00-9:00pm
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8
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10-23-2009
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Friday
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1:30-4:30pm
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9
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10-27-2009
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Tuesday
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6:00-9:00pm
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10
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10-30-2009
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Friday
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1:30-4:30pm
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11
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11-3-2009
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Tuesday
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6:00-9:00pm
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12
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12-4-2009
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Friday
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1:30-4:30pm
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Reading List and Class Outline for Fall
2009
Stole’s Note on Contract Theory
Class 1-3:
Mechanism Design
*Chapters 2-3 of Laffont and Martimort (intuitive, 2 type
cases; read before Stole).
*Chapter 2.1, 2.2.1-2.2.5 of Stole’s Note
Application:
Chen, Q. 2003. “Cooperation in the Budgeting Process.” Journal
of Accounting Research 41(5).
Kanodia, C. and
D. Lee. 1998. “Investment and Disclosure: The Disciplinary Role of
Periodic Performance Reports.” Journal of
Accounting Research 36(1): 33-55.
Riley,
J. 2001. “Silver Signals: twenty-five years of screening and signaling” Journal
of Economic Literature, June 2001, 432-478.
Chen, Q., T. Lewis and Y. Zhang.
2009. “Selective Disclosure of Public Information: Who Needs to Know?” Duke
University working paper
Class 4-11: Moral
Hazard
*Chapter 1.1.1,
Stole’s Note
*Holmstrom,
B.R. 1979. “Moral Hazard and Observability” Bell
Journal of Economics, Spring.
*Milgrom,
Paul. 1981, “Good News and Bad News: Representation Theorems and Applications,”
The Bell Journal of Economics 12,
Autumn, 380-391.
Rogerson, W.
1985. “The First-Order Approach to Principal-Agent
Problems,” Econometrica.
Jewitt,
I. 1988. “Justifying the First-Order Approach to
Principal-Agent Problems.” Econometrica.
Kim,
S. 1995. “Efficiency of an Information System in an Agency
Model.” Econometrica
63: 89-102.
Moral Hazard in
Teams:
*Holmstrom, B. 1982. “Moral Hazard in Teams”, The Bell Journal of Economics, Autumn.
Hermalin, B. 1998. “Toward
an Economic Theory of Leadership: Leading by Example.” American Economic Review 88: 1188-1206.
Li, H. 2001, “A Theory of Conservatism,” Journal of Political Economy 109: 617-636.
Moral Hazard
Extension I: the LEN model and its application
*Holmstrom, B. and P. Milgrom.
1991. “Multi-Task Principal-Agent Analyses: Incentive Contracts, Asset
Ownership and Job Design,” Journal of Law, Economics & Organization
7.
Holmstrom, B.
and P. Milgrom. 1987. “Aggregation and
Linearity in the Provision of Intertemporal
Incentives,” Econometrica: 303-328.
Moral Hazard
Extension II: performance measurement
*Baker, George P. 1992,
“Incentive Contracts and Performance Measurement,” Journal of Political Economy, Vol. 100, 598-614.
*Banker, R.
and S. Datar. 1989. “Sensitivity, Precision, and
Linear Aggregation of Signals for Performance Evaluation,” Journal of
Accounting Research 27 (1): 21-39.
Feltham, G. and Xie, J. 1994. “Performance Measure Congruity and Diversity
in Multi-Task Principal/Agent Relations,” The Accounting Review:
429-453.
S. Datar, Kulp, S., and R. Lambert.
2001. “Balancing Performance Measures,” Journal
of Accounting Research, Vol. 39, 75-92.
Career concerns
model
*Holmstrom, B. 1999. “Managerial Incentives Problems – A
Dynamic Perspective,” Review of Economic
Studies 66: 169-182.
Holmstrom, B.
and J. Ricart i Costa.
1986. “Managerial Incentives and Capital Management.” Quarterly Journal of Economics 55: 303-328.
Gibbons, R. and K. Murphy. 1992.
“Optimal incentive contracts in the presence of career concerns.” Journal of Political Economy 100:
468-505.
Meyer, M. and J. Vickers (1997),
“Performance Comparisons and Dynamic Incentives,” Journal of Political Economy 105: 547-581.
Indjejikian, R., and D. J. Nanda (1999). “Dynamic
Incentives and Responsibility Accounting,” Journal
of Accounting and Economics 27: 177-201.
Other signal jamming type of model
Chen, Q., T. Hemmer and Y. Zhang.
2006. “On the Relation Between Conservatism in Accounting Standards and Incentives
for Earnings Management.” Journal of Accounting Research.
Stein, J. 1989. “Efficient
Capital Markets, Inefficient Firms: A model of myopic corporate behavior,” Quarterly Journal of Economics 104(4):
655-669.
Ron, Dye. 2002. “Classifications
Manipulation and Nash Accounting Standards.” Journal of Accounting Research 40: 1125-62.
Information
gathering effort
*Prendergast,
C. 1993. “A Theory of the ‘Yes Men’”, American
Economic Review, September, 757-770
*Lambert,
R. 1986. “Executive Effort and Selection of Risky Projects,” Rand Journal of Economics 17: 77-88.
Li, H. 2001, “A Theory of Conservatism,” Journal of Political Economy 109: 617-636.
Renegotiation, Mechanism Design Application
*Fudenberg, D. and J. Tirole.
1990. “Moral Hazard Renegotiation in Agency Contracts,” Econometrica 58: 1279-1319.
Gigler, F. and T. Hemmer. 2001. “Conservatism, Optimal Disclosure
Policy, and the Timeliness of Financial Reports.” The Accounting Review 76(4): 471-93
Chen, Q., T. Hemmer and Y. Zhang.
2009. “On the Use of Loose Monitoring and Lavish Pay in Agency.” Duke
University Working paper
Other papers of
interest:
*Prendergast, C.
and L. Stole. 1996. “Impetuous Youngsters and Jaded Old-Timers.” Journal of Political Economy 104:
1105-1134.
*Aghion, P. and J. Tirole, 1997,
“Formal and Real Authority in Organizations,” Journal of Political Economy 105: 1-29.
Prendergast, C. 2002.
“The Tenuous Tradeoff Between Risk and Incentives,” Journal of Political Economy 110:
1071-1102.
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Reading List and Class Outline for Fall
2008
Class 1: Information in financial market (Sept. 5)
J. Hirshleifer, 1971, “The
Private and Social Value of Information and the Reward to Inventive Activity,” American
Economic Review 61: 561-574.
Verrecchia, R. 1982. “Mathematical model in accounting,” Journal
of Accounting Research 20(Supplement): 1-42.
Class 2:
Rational expectation equilibrium models: (Sept. 14)
Verrecchia, R. 1982. “Information Acquisition in a Noisy
Rational Expectations Economy,” Econometrica
50, No. 6, 1415-1430.
Diamond, D.
1985. “Optimal release of information by firms,” Journal of Finance,
Vol. XL, No. 4, September.
Holthausen, R. and R. Verrecchia, 1990. "The Effect of Informedness and Consensus on Price and Volume
Behavior," Accounting Review 65: 191-208.
Kim, O. and R. Verrecchia, 1991. "Trading Volume and Price Reactions to Public
Announcements," Journal of Accounting Research 29: 302-321.
Class 3:
Rational expectation equilibrium models: (Sept. 19)
Lambert, R. C. Leuz, and R. Verrecchia, 2006. “Information
Asymmetry, Information Precision and the Cost of Capital.” Working paper, Wharton School.
Easley and O’hara,
2004. “Information and the cost of capital,” Journal of Finance,
August, 1553-1583.
Gao, Pingyang, 2008. "Disclosure Quality, Cost of Capital, and Investors’ Welfare"
Working paper, University of Chicago
Class 4: Strategic trading
models: (Sept. 26)
Kyle, P. 1985. “Continuous Auctions
and Insider Trade,” Econometrica 53:
1315-1335.
Maug, E. 1998. “Large Shareholders as Monitors: Is There a
Trade-Off between Liquidity and Control?” Journal of
Finance, Vol. LIII, No. 1.
Kahn, C. and
A. Winton 1998. “Ownership Structure, Speculation and Shareholder
Intervention,” Journal of Finance, Vol. LIII, No. 1.
Admati, A and P. Pfleiderer, 2008. “The ‘Wall Street Walk’ and Shareholder Activism:
Exit as a form of voice,” Review of Financial Studies forthcoming
Bolton, P. and von Thadden,
E., 1998. "Blocks, Liquidity and Corporate
Control." Journal of Finance, Vol. 53: 1-25.
Edmans, A. 2008. "Blockholder Trading, Market Efficiency, and Managerial
Myopia." Journal of Finance forthcoming
Bhattacharya,
U and M. Spiegel, 1991. “Insiders, outsiders and market breakdowns,” Review of Financial
Studies 4: 255-282.
Class 5: Strategic trading
models: (Oct 10)
Holmstrom, B. and J. Tirole, 1993. “Market Liquidity and Performance
Monitoring,” Journal of Political Economy 101, 678-709.
Diamond, D. and R. Verrecchia. 1991. “Disclosure, Liquidity, and the Cost of Capital,” Journal
of Finance 46: 1325-1359.
No class on Oct. 17.
Class 6: Higher order
expectation (Oct. 24)
Morris, S. and H.S. Shin. 2002. “Social Value of Public
Information”, American Economic Review 92: 1521-1534.
Angeletos, G. and A. Pavan. 2004. “Transparency of Information and Coordination in Economies
with Investment Complementarities”. American Economic Review 94 May: 91-98
Gao, P.Y. 2008, “Keynesian Beauty Contest, Accounting Disclosure, and Market
Efficiency,” Journal of Accounting Research 46: 785-807.
Class 7: Global games (Oct
31)
Morris, S. and H. Shin, 2003,
“Global games: theory and applications,” in S.J. Turnovsky,
M. Dewatripont, L.P. Hansen, ed: Advances in Economics and Econometrics (Cambridge
University Press: Cambridge).
Plantin, Sapra and Shin, 2008, “Marking
to Market: Panacea or Pandora's Box?” Journal of Accounting Research 46:
435-460.
Chen, Q., I. Goldstein and W.
Jiang, 2008, "Payoff Complementarities and Financial Fragility: Evidence
from Mutual Fund Outflows," Working paper, Duke/Wharton/Columbia.
Class 8: Feedback effect
(Nov. 7)
Dow, Goldstein and Guembel, 2007, “Incentives for Information production in
markets where prices affect real investment”, Wharton School, working paper.
Bond, Goldstein and Prescott,
2008, Market-based corrective actions, Wharton School, working paper,
Edmans, Goldstein and Jiang, 2008, Takeover
Activity and Target Valuations: Feedback Loops in Financial Markets, Wharton
School, working paper
Bleck, A. and
Liu. X.
2007, “Market Transparency and the Accounting Regime,” Journal of Accounting
Research 45: 229-256
Class 9: Voluntary
disclosure (Nov. 14)
Grossman, S., 1981, “The Role of Warranties and Private Disclosures About Product Quality,” Journal of Law and Economics 24.
Jovanovic, B., 1982, “Truthful Disclosure of Information,” The
Bell Journal of Economics 13 (Spring). (student presentation)
Jung, W. and Y. Kwon. 1988. “Disclosure When the Market
is Unsure of Information Endowment of Managers,” Journal of Accounting
Research 26 (1): 146-153. (student presentation)
Class 10: Voluntary disclosure and the stock prices
(Nov. 21)
Shin, H.S.
1994. “News
management and the value of the firm,” Rand Journal of Economics, 25(1):
58-71.
Shin, H.S. 2002. “Disclosure
and Return,” Econometrica 71: 105-133.
Shin, H.S. 2006. "Disclosure Risk and
Price Drift," Journal of Accounting Research 44: 351-379.
Class 11: Disclosure and
real activity (Dec. 5)
Kanodia, C. 2006 “Accounting Disclosure and Real
Effects" Foundations and Trends in Accounting. Vol. 1, No.
3.
Kanodia, C. and D. Lee. 1998. “Investment and Disclosure: The Disciplinary Role
of Periodic Performance Reports.” Journal of Accounting Research 36: 33-55.
Kanodia, C., A. Spero
and R. Singh. 2005. “Imprecision in Accounting Measurement: Can It Be Value Enhancing?”
Journal of Accounting Research 43: 487-519.
Kanodia, C., H. Sapra
and R. Venugopolan, 2004. “Should Intangibles be Measured: What are the Economic Trade-Offs?” Journal of Accounting
Research 42: 89-120.
Kanodia, C., A. Mukherji,
H. Sapra and R. Venugopalan,
2000, "Hedge Disclosures, Future Prices, and Production Distortions,"
Journal of Accounting Research 38: Supplement, 53-82.