A Rationale for Imperfect Reporting Standards

Friedman, Henry L.; Hughes, John S.; Michaeli, Beatrice

doi:10.2139/ssrn.3183482

Cited by 11 publications

(2 citation statements)

References 52 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…In some applications, however, the existence of evidence may depend on the desired quality of the measured evidence. To illustrate this problem, we consider as in Friedman, Hughes and Michaeli [2019] environments in which a more precise measurement

G

also implies a higher probability of not receiving information. In particular, suppose that the probability of not receiving information

q (τ)

is an increasing function of

τ

.…”

Section: Discussionmentioning

confidence: 99%

Strategic Withholding and Imprecision in Asset Measurement

Bertomeu

Cheynel

Cianciaruso

2021

J of Accounting Research

View full text Add to dashboard Cite

How precise should accounting measurements be, if management has discretion to strategically withhold? We examine this question by nesting an optimal persuasion mechanism, which controls what measurements are conducted, within a voluntary disclosure frameworkà la Dye (1985) and Jung and Kwon (1988). In our setting, information has real effects because the firm uses it to make a continuous operating decision, increasing in the market's belief. Absent frictions other than uncertainty about information endowment, we show that imprecision can reduce strategic withholding but always weakly decreases firm value. We then examine plausible environments under which, by contrast, there is an optimal level of imprecision featuring coarseness at the marginal discloser. We offer additional implications in the contexts of enforcement against strategic withholding and financing with collateralized assets.

show abstract

G

also implies a higher probability of not receiving information. In particular, suppose that the probability of not receiving information

q (τ)

is an increasing function of

τ

.…”

Section: Discussionmentioning

confidence: 99%

Strategic Withholding and Imprecision in Asset Measurement

Bertomeu

Cheynel

Cianciaruso

2021

J of Accounting Research

View full text Add to dashboard Cite

show abstract

“…The key friction in their setting is that the firm's management may lack incentive to exert effort, which creates a need for the firm to pledge its assets to the lender to mitigate the moral hazard problem. 3 Accordingly, the measurement rule of the asset value plays an essential role in 2 In particular, recent accounting literature studies ex ante information design applying the framework of Bayesian persuasion following Kamenica and Gentzkow (2011), for example, Jiang and Yang (2017), Huang (2019), Friedman et al (2020Friedman et al ( , 2021, and Laux and Zheng (2021).…”

Section: Related Literaturementioning

confidence: 99%