gern oe Bean aot Fry, Conportad ¢ Jicelosute.an d the capital Tofactmation ay Wetadene’ mankeds’ roview 0} the empiteal Aigelosude paul me Healy , kaishaa pale pve(2007) Framewortls, Jor analyzing manager’ Jal matkels Sesting , rovnews 8 Guster Plsheacd?- ths papet provides a popotting and disctoswte. decisions in 4 Capi and ‘dently dhe key reseatch questions. Also empidedl mUseateh on d and the dotetminants and econ igclogude Tegulaton information snteamedac: omic consequenaes 6) donporal ! disclosure. ITateoduehion 2- @ocporate Agdlosude is CCHeal fort the Junationing | oh an elfectent Capital matkel- Firms Ahetough oquiated Kinanctal Tapers , Socludia } discussion and analysis ana olhert requertony provid ¢ diselosuxt | he finaneal statements, Joonotes , managemen filings. Ly some Hams capac in syotuntary @ommunicaion Such as feangenent fornaasts, analysy's Prerentatione and Conbence cals, press relates, inkanet siley nd other @ortporatt € rioport H. Ly trent are Praloswtes aout amy by afoamation tatemedare, Suck |e financial analjsts, industy ertark and fnangal priest, Bieees Gaming: The paees shat Gis wise to demand ton Asclosute in a modern capital Marked Ceonomy and insttetions dhaf neteate the cred biby of discloswus. Heng the ange ment 4 dhat demand bot fenandal nan and diabwute ant 4 fag iofotmaton astymmety and agerey eonfliels between Manager and quiside invesfore. The Credibibly of Hragpeecs i Aeclogutt, 1s -enhanerd My Tagulabrs, standard Settee audibay and Hhet @apal maghet infumediaces. ‘ ¢ Section- 3 eviews the findings on reputation of Financ) Meponting e and disclosure. i ~ Section-4 4 Resenich on effectiveness of audibas and infamahion om - ee - = inlermediaties ig disenued 19 this Seton. Section & reviews jhe economic determinants of mana eel Finandal Maporting and direlosute dectsi ons. | il Tn Secki =| 9 Section 6 + the capital market Consequences of managers bri finandal reporting and dhiselosum desstans ig dseuned ef ; . =| hb v7 ’ sae f ~- Pin Section 7: thew arg Significant Changes in. the economie = E envionment — rapid eahngty Neat } i 4 'rnovation , 4th a I 8d refer, Onipaniza di "¢ Pshemeng cece ST | On aniZahOn @ te. Gre diseased, Ea ~ « | lNe Ob disclosure in Gapital Mathels?= > Iniortmatio . f A fo and incentive problems Genpede the efferent ar i ‘ locaton of MWsoutas in a Capital mas het economy Diiebsuce and insktutions Grealed tb Jaalitate Guaible disclose belveen Manages and iovesfoas plany an important role in mikgating These problems. 201% Tnfotmation pProblems- The information O« ‘Lemons problem asses from Gnfoamation difference and conflicting incentives ‘ beqwan entreprenenns and Savas, HY imeshas Cannot dickinguich bebyeen [UII ae bsg" ideas, eneepaeneurs i dad? ideat will try te claim That then ideas aar_as valuable 48 prokiem {6 not fully resstveds dhe," goa” ideas TY the lemons Ake Capilal_marthe will_rakionaly ana 0 fealag— S07 bad teas) mlative b the (afomayan u Ae axuble tf entrtpren. = th Botations of Lemon ptoblemsi— Soke eontacle Maza enfepaeneins and Tovrbny) “ pesunhens bo! (ees raregea © Fel dele Hee romif, [- i anfoatnation . = sel jadoamadion Geeme dian'es [wil hile fe nerves ie eee on. ie : ee potent reste andes mit vs ge vb gt shovenanders = ACTOYTM si att -ans feng pwoblem ;- The Yen] Problem awses be Saves tbat invest tn business venture ytetty do nor intend #* Phy an aatye role in its cre that ' rasponsibibly is delegates fo the entteproneut- \ pty AE ' : pele gtd ist | SolaHions + the agency Problem “si cet ae yet feu « , ee sf i * Opkmat contracts belwen enttepreneuts and imests sue h a i Compensation agnuements and dab} Qontracts. — ‘ Lp Seed machanism ‘ort reducing eng, prebem Te the bavea « 4 of Seteebts, whose role is to montton and diepline matey emantt on behalt of erfernal owner. j + Information jndermediar'es Such ag hnanerat analist and rating | ‘ agencies nengaye io pevale informa tion Produchsn > Uunened an ‘ Managed mise 0 : te ( be The marked px otpaak cuntryt, Which includa Ge Ihgech ‘ hogfit SS fe toxeoud and REY Contest also wife gene] ‘ problems. q « « « 14 a ‘ - ‘ « ste A ‘ on Sige They \ i aay, Vy, “be : 4 emda Ha. iw by « oe1g Reseach —tanplteations« plications i The snfotmation and agen Jrameworis raise a pambed of important qustians for finance! reporting and disdlosuce quseanehers. Thee includ € quest ans on (i the tole Ot dieclosute and finavctal rapou ting mitigehiog infoerrna Hien and ager problem: (we) The affects veness 4 tudes ond {informed 09 iokeanedian’es ® cam a soe BE CNTY oh rangement: Seer and yncoieer) new rnfpetem Hn « XS \ Ci) aches affecting deesions by marge sin franca! erorting and sels: and megelation in $ att Regulation of pigclaswte t= peblie qs ginee bu} cane? chart be. niewed oS a foe Hs pro duction potent! 7 f ake cnfoamation. prospechye ines be, sbamasion pus fe by existing shastthel Las yodexproduetion Of tefpremation tn dhe economy. othe Ahan narkel {alae vafoamation car 4g hol des genpuelly PQ mullBae Regulation Of finance! Reporting Cholees t= Aewuntin Slondasds eeguiale the mepwthing choices available fp managers — in pacsentig the fines financal sielements. Ts 4yPe of regulation potentially reduces processing Costs pa finandal Statement user by Providing a Commonly dearpled language thal managers tan bse ® Communtade with fovespr, Regulated [arndal fnfamation provides sauable infoumakan fo loves fe Ok Audibots and Infecmediaties in the Disclasete Prtseess s— leyat Audstors’ Auditors Provide Tovesfors with independent assurance Abate fae (Frandal Sekarte confem_ ¥oGARP.) Ls Gaps! Priiden requir prams to bide an independent auditon aS A Condition of financag pexen whand is not roqred - by Tagua ns, be Gapital Prle vf deat rlegaeds audilots as Eohansing Geek bstty, [7 fut gti ao ot me ne ps BY caral parked LeAatfied opinions do sf _piewde tas tnptmakonly the iver ba Te Auditbas prow de tamal assuganee only on HN annual repeat faking + dtflatt fu stam t» pronde Smell signals 4p the carl Mats carerrrrrerererrererrrerre¢19999aag E Sete e a |2% Tnfenme dation’ "Pinane v7 Finandial nage = Francal anal ate Goer tpamation from pubwie and prcsale Sourtee\, evaluate the Cursnt peremance of fiems thd th Pefeasts_ ated fonow, make i—> Fnancal Angiyls_aaé ae] fal matket, L, Trae eastni ogy foncasls ate any ayat Hee Setes models of east remnn WAAAY eae ats and Tlacommendathons ast ea aan POG in tbe @aet Aralys ys eeBe Manages Reporting heesionss- Reseatch.on Tanadeag rapochiog decisions has Joewed on two ans (positive Accounting Theoay! fieos on engts finantel xepoUtng Choices. © rolwntany Gvelosuee Literate’ foeases on mangement dbcbuae gr dersions, | Beas posifve Alewunting jheoay Liferafyies- Powe on Managements motes tort taaking Accounting Ghoieses, hen matkets ane Semi- Sttong foam effecent, + The central freus of this Kitetahute ig 4o examine the rtole of Contrtackay and political Considecadions tn ex planing management Accounting ahoices whan the ate agency costs and information Osyrnmne ty. 5:27 Volunlaty bisclosute Utedature § - Pisclosate studies assume that, even.in an alfisent eapital nad ket, managers hare Supetion fafortmation 40 outside 4 rvevtorts pn dhed fess expected future pertumanee. st accounting regulator and auditing ate sunpedlect, a mone “Wkely passibivy enonagens nade off belween maktog accounting dee'sion and Acelosutes 42 Communieate there Supecod roowledge J fines o Pextfodmanee 4p Aovestorts , and to Manage stLpotd perfumane $a rhacking , pobtical on Qonporate governance reaton'. , 222022090800000090046024800002080464048080804044484ed Mon ee 4es tort Nolunlacy biselouee’ motives that Aifect managers gisel acts gman ket Teasons: d selogurte decsions fom capital (0) capital nat ket rtansact 005 hypothesis, 1B) Conporade Conta! Conte Iypothesis le) She ‘ "s x Compensahon Inyeothests yn 1) Lstigetion cost hypothesis. od sales Ye t> wal aloo sob hypothesis we, jet Apogee po § " ’ () propadnry ost Iypothsis. a on “, aw w oT + jaunsact Or hypothesis athe’ Pee at £ nage erpecing go Wg5ud Gna geek (® Gapitetl pred fant +0 Qoaporne mal ae qoothed campang have Supeeot inten dude peasez spo e? cea rrt byeteep®. aed DOPRD ype Pen sac ‘This hypothesis is: fos and Anus tons Aowinal “Gontest Hypothesis «that boartds ot 4 | oy agaponate : morte by ent dene pe holds manages ace : volun drebsute Mot lynne sngg pestpremene e [ape las scoot a ™ ne arbre’ of | manages. se corporate digo losut es fo seduce fr fi eepave pin awed pont eaaningt i - ondexaelua on and b + fe) stork —@ompensetion Hytothests o fMamagets arte dancer ly | awarded using @ vai et of Shek: based Compensation pang Such as Spek option gents and sfck appredation sgh. Icrrese tyres oF —eompensetin Schemes provider Gncen tive fort p eypge ‘io Yoluntarty disetosune - a SA era teaser have incentive d tr disclose foe a Steck © rrmngess ane iting fo dire iaforrnaon 1 the why of stem inigyalurton es ae lu aveeertereeeaeneaaaaeccecaeBy LitigaHon Gost Hypothesis .- The Corttols ate likely b be Fm peceet. ‘ i} { ' 4 ‘ ‘ ‘ ' 1 ‘ ‘ ‘ ‘ ‘ ‘ ‘ t) ‘ ‘ ( ‘ ( ‘ ‘ ‘ 4 ‘ ( ‘ ‘ 4 ‘ ( 'Fy. whew do we Qo from here? Empiceal segecteh diseussed fn Supports Abe ‘pniowing broad apne lusi ons : G) Requiated Jtnandal yapoats ane inhamadive * | dhe degree of inforematweness vast US systematically i hies . this Paper ves f046,00 0 with am and economy character’ @ Firancal Analysts aga vawe 10 dhe @ ew ig a male deer dunand tr ant Senvieer. @ Both finanéal anape) and auditods att qenpecea indarmedionnt. Capital ena ke+ else Choices 4% © ets -finanéal qupottin and associated ith cambuacting po Heal cost, 20d capiyal mastke Qonsid tations - gah She poe pertfaceaan ebidrat & pisetouete ts assaciade Spread, analysts forewing and mental unan wend quad msi — sashtutional Qurushp . e Home funda ( svchat ts jhe objeckye o} diselosuae negulak on,.298 ovat 15 1% sia) masher davelopmend? effects 00 Capi @) what “Ayres af accounting Standards 6) bo aud tens enhance [he cuedidibty thy ast Selrsid ‘ oat eleside analysts’ freee and rteapmmen dates CLAM produee high quvly Jinaneal sega. of frarcal sdadements. eset weet documenked basts and cpnfbess of intemsts? _ , r© what fe the sole of analysis in rapid swings in Shek pues © why do fums erage in volundagy diselosute 9 : H doe dicbsute akeed frms cost of aapidal? Jin addition ty these unanswend Merton, we bebe, that WAN pnaeto- eemnomie fotees Cate Several new Opporttuy ba- fod twheatch. @ papid “Hehoolgieat Tanoadion | ® tredwowk Org nizadions O changes in business economies of audit Hams and fiaancat anetysh, © Godabzali on. bo TVEeP PPP PPE Pererananneececaaaaaaanaeece |