We develop an agency model in which managerial information manipulation creates pooling and entails ex post costs internal and/or external to the firm. We examine the implications of the strategic interactions between shareholders (who set internal governance and managerial incentive compensation), the manager (who exerts effort and reports on its outcome), and an external regulatory authority or RA (who investigates for fraud and levies penalties ex post). When the RA cannot pre-commit to an ex post investigation strategy, a fraudulent equilibrium obtains if the firm's internal governance costs are sufficiently high. Consistent with (so far fairly scant) post-SOX empirical evidence, but the opposite of the implications of signal-jamming models and equilibria with pre-commitment, the model implies an increase in minimum internal governance standards or ex post fraud penalties (as with SOX) results in decreased equilibrium pay-for-performance sensitivity and firm performance.

Reviews the book "Accounting and Federal Regulation," by James P. Bedingfield

Reviews the book "Public Utility Regulation," by W.E. Mosher and F.S. Crawford

Reviews the book "Corporate Finance and Regulation," by Chelcie C. Bosland

Reviews the book "The Regulation of Industry," by Dudley F. Pegrum

The role of accounting in public utility regulation is merely one aspect of the role of accounting in the broader field of economic control. Of course, the general development of accounting is a process of evolution which has gone on for many centuries whereas the use of accounts in public utility regulation is a matter of recent origin, as of July 1947. It is, in fact, considerably less than 100 years old. Nevertheless, the use of accounts as a tool of regulation is, in a sense, a forerunner of the current dominant trend in general accounting. The procedure in this article will be to consider first, public-utility regulation and some of the accounting problems associated with it. On the basis of that discussion the author shall turn to the broader problem of general economic control in the expectation that the broader view will help to appraise better the place of accounts in public utility regulation. The regulation of public utilities developed as a practical expedient designed to correct certain injustices and abuses which had arisen in the prevailing economic system of competitive control. From the start regulating commissions have been heavily dependent upon accounts

Reviews the book "Provisions in CPA Laws & Regulations

Reviews the book "New Federal Estate Tax Regulations

We develop a model in which accounting information and prudential regulation interact to affect banks’ incentives to originate loans. Prudential regulators impose capital requirements to prevent banks from taking excessive risk. However, regulators cannot commit to ex ante efficient intervention and, instead, respond to ex post accounting information. We show that capital requirements and accounting measurement are substitutes when considered separately. By contrast, when considered jointly, accounting measurement and capital requirements are complementary tools that affect the level and efficiency of credit decisions. Comparative statics link capital requirements, quality of accounting information, and regulatory intervention to credit market conditions. An upshot of our analysis is that by appropriately optimizing the information from expected loss models, prudential regulators may design looser capital requirements to spur more bank lending

Reviews the book "Regulation and the Accounting Profession," edited by John W. Buckley and J. Fred Weston