| Popis: |
This research investigates the relationship between reputation and two types of agency costs, namely those associated with auditing and those associated with value-reducing activities of management resulting from their capitalizing on asymmetric information by misreporting income. A competitive-market model is used as a basis for developing and empirically testing hypotheses using an experimental-markets approach. This model includes (1) contracting between risk- neutral owners and risk-averse managers that allows risk sharing, (2) information asymmetry favoring managers over owners, (3) public financial reporting by managers, (4) the presence of endogenously-priced costly auditing that can be demanded by either management or owners, and (5) opportunities for managers to engage in value-reducing activities that are not directly observable by the owners. Two main hypotheses are set forth, both of which are found to be supported by formal statistical tests based on the data from the experimental ma... |
