Optimal penalty and accounting policy

Masatomo Akita, Yusuke Osaki

Research output: Contribution to journalArticle

Abstract

This study considers risky investment projects under adverse selection and examines optimal penalties for erroneous auditing reports to maximize social welfare. These penalties give firms an incentive to choose accounting policies that maximize social welfare. We characterize the optimal penalties such that efficient firms choose an aggressive accounting policy and inefficient firms choose a conservative accounting policy.

Original languageEnglish
Pages (from-to)5292-5299
Number of pages8
JournalApplied Economics
Volume48
Issue number54
DOIs
Publication statusPublished - 2016 Nov 19
Externally publishedYes

Fingerprint

Penalty
Accounting policy
Social welfare
Investment project
Conservative accounting
Incentives
Auditing
Adverse selection
Risky investment

Keywords

  • Accounting policy
  • adverse selection
  • audit
  • investment efficiency
  • optimal penalty

ASJC Scopus subject areas

  • Economics and Econometrics

Cite this

Optimal penalty and accounting policy. / Akita, Masatomo; Osaki, Yusuke.

In: Applied Economics, Vol. 48, No. 54, 19.11.2016, p. 5292-5299.

Research output: Contribution to journalArticle

Akita, Masatomo ; Osaki, Yusuke. / Optimal penalty and accounting policy. In: Applied Economics. 2016 ; Vol. 48, No. 54. pp. 5292-5299.
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