Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/76900 
Year of Publication: 
2002
Series/Report no.: 
Working Paper Series: Finance & Accounting No. 99
Publisher: 
Johann Wolfgang Goethe-Universität Frankfurt am Main, Fachbereich Wirtschaftswissenschaften, Frankfurt a. M.
Abstract: 
This paper examines the provision of managerial investment incentives by an accounting based incentive scheme in a multiperiod agency setting in which an impatient manager has to choose between mutually exclusive investment projects. We study the properties of accounting rules that motivate an impatient manager to exert unobservable effort and to make optimal investment decisions. In this analysis, a realized cash flow constitutes a noisy signal that contains information about the unknown profitability of the investment project. By observing these signals a principal is able to revise his prior beliefs about the agent´s investment decision. The revision of the principal´s prior beliefs leads to a trade off between the provision of efficient investment incentives and intertemporalsharing of output.
JEL: 
M41
G31
D82
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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