In this paper, I examine survivorship bias in hedge fund returns by comparing two large databases. I find that the survivorship bias exceeds 2% per year. Results of survivorship bias by investment styles indicate that the biases are different across styles. I reconcile the conflicting results about survivorship bias in previous studies by showing that the two major hedge fund databases contain different amounts of dissolved funds. Empirical results show that poor performance is the main reason for a fund's disappearance. Furthermore, I find that there are significant differences in fund returns, inception date, net assets value, incentive fee, management fee, and investment styles for the 465 common funds covered by both databases. Mismatching between reported returns and the percentage changes in NAVs can partially explain the differences in returns.

Two complementary sources of information are studied in a multiperiod agency model. One is an accounting source that partially but credibly conveys the agent's private information through accounting recognition. The other is an unverified communication by the agent (i.e., a self‐report). In a simple setting with no communication, alternative labor market frictions lead to alternative optimal recognition policies. When the agent is allowed to communicate his or her private information, accounting signals serve as a veracity check on the agent's self‐report. Finally, such communication sometimes makes delaying the recognition optimal. We see contracting and confirmatory roles of accounting as its comparative advantage. As a source of information, accounting is valuable because accounting reports are credible, comprehensive, and subject to careful and professional judgement. While other information sources may be more timely in providing valuation information about an entity, audited accounting information, when used in explicit or implicit contracts, ensures the accuracy of the reports from nonaccounting sources.

Two complementary sources of information are studied in a multiperiod agency model. One is an accounting source that partially but credibly conveys the agent's private information through accounting recognition. The other is an unverified communication by the agent (i.e., a self-report). In a simple setting with no communication, alternative labor market frictions lead to alternative optimal recognition policies. When the agent is allowed to communicate his or her private information, accounting signals serve as a veracity check on the agent's self-report. Finally, such communication sometimes makes delaying the recognition optimal. We see contracting and confirmatory roles of accounting as its comparative advantage. As a source of information, accounting is valuable because accounting reports are credible, comprehensive, and subject to careful and professional judgement. While other information sources may be more timely in providing valuation information about an entity, audited accounting information, when used in explicit or implicit contracts, ensures the accuracy of the reports from nonaccounting sources.