The Information Content of Mandatory Disclosures

The information quality of mandatory financial reporting depends on two factors: (1) Are standards appropriate to produce financial statements that provide investors with sufficient information? (2) Is compliance to standards enforced by appropriate institutions? This paper addresses the question if firms should be able to create hidden reserves as an example for the effect of standards on information quality. The analysis shows that rational investors are able to correctly decipher financial statements independent of the standards in use. The question of sufficient enforcement proves to have a deeper impact on the quality of information

Stock Options and Chief Executive Officer Compensation

Although stock options are commonly observed in chief executive o±cer (CEO) compensation contracts, there is theoretical controversy about whether stock options are part of the optimal contract. Using a sample of Fortune 500 companies, we solve an agency model calibrated to the company-specific data and we find that stock options are almost always part of the optimal contract. This result is robust to alternative assumptions about the level of CEO risk-aversion and the disutility associated with their effort. In a supplementary analysis, we solve for the optimal contract when there are no restrictions on the contract space. We find that the optimal contract (which is characterized as a state-contingent payoff to the CEO) typically has option-like features over the most probable range of outcomes

Molecular mechanisms of cell death: recommendations of the Nomenclature Committee on Cell Death 2018.

Over the past decade, the Nomenclature Committee on Cell Death (NCCD) has formulated guidelines for the definition and interpretation of cell death from morphological, biochemical, and functional perspectives. Since the field continues to expand and novel mechanisms that orchestrate multiple cell death pathways are unveiled, we propose an updated classification of cell death subroutines focusing on mechanistic and essential (as opposed to correlative and dispensable) aspects of the process. As we provide molecularly oriented definitions of terms including intrinsic apoptosis, extrinsic apoptosis, mitochondrial permeability transition (MPT)-driven necrosis, necroptosis, ferroptosis, pyroptosis, parthanatos, entotic cell death, NETotic cell death, lysosome-dependent cell death, autophagy-dependent cell death, immunogenic cell death, cellular senescence, and mitotic catastrophe, we discuss the utility of neologisms that refer to highly specialized instances of these processes. The mission of the NCCD is to provide a widely accepted nomenclature on cell death in support of the continued development of the field

Design and Implementation of Pay for Performance

A large, mature and robust economic literature on pay for performance now exists, which provides a useful framework for thinking about pay for performance systems. I use the lessons of the literature to discuss how to design and implement pay for performance in practice

Limited Commitment in Multi-agent Contracting

Abstract: The analysis in this paper extends the single-agent/multi-task LEN model in Feltham/Xie (1994) to a multi-agent/multi-task context. A key feature of the paper is that we consider both full- and limited-commitment contracts. The former apply to settings in which the principal can specify the contracts for each agent and is assured that those contracts will be implemented. The latter apply to settings in which the agents can collude to effectively change the terms of their contracts. Equivalently, limited contracting occurs if the principal can set the terms of the aggregate compensation pool, but must let the agents choose how the pool is allocated among the agents. From the principal’s perspective, full-commitment contracts dominate limited commitment contracts. There are two basic frictions that result in a reduced payoff with limited commitment. One is inefficient risk sharing which occurs because the agents will choose to share their incentive risk and this results in reduced induced effort. The other is inefficient allocation of effort, which occurs because when the agents allocate the aggregate incentives they ignore the principal’s payoff and focus on inducing actions that maximize their compensation

Accounting and Valuation: How Helpful Are Recent Accounting Rule Changes?

The longstanding debate over the proper definition of "earnings"-whether investors when setting stock prices focus primarily on GAAP earnings or other measures like operating cash flow-is both misguided and theoretically unresolvable. The biggest problem faced by investors in evaluating earnings reports is not their inability to understand the effects of the different accounting methods companies use when aggregating accounting line items into reported net income. More challenging, and more critical to the investment process, is getting complete and reliable information about the line items themselves. The authors' underlying premise is that investors, when provided sufficient information about these "components" of earnings, can combine or reconfigure them in whatever way they find most useful. But without sufficient and reliable information about the individual line items, investors will find it difficult to understand how earnings are generated and thus to produce the forecast of future earnings necessary to value a company. 2006 Morgan Stanley.