Abstract:We study the optimal degree of harmonization of accounting standards when rms' in-vestments exhibit "beauty-contest" features as in, e.g., Arya and Mittendorf (2016). We model more harmonization of accounting standards as the noises in rms' reports being more correlated, consistent with Barth et al. (1999). We show that while more harmonized accounting standards have ambiguous e¤ects on the reports' informativeness in represent-ing rms'underlying fundamentals, they always reduce the reports'precision in foreca… Show more
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