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Marking to Market and Inefficient Investments
- Publication Year :
- 2013
- Publisher :
- HAL CCSD, 2013.
-
Abstract
- We examine how mark-to-market accounting affects the investment decisions of managers with reputation concerns. Reporting the current market value of a firm's assets can help mitigate agency problems because it provides outsiders (e.g., shareholders) with new information against which the management's decisions can be evaluated. However, the fact that the assets' market value is informative can also have a negative side effect: Managers may shy away from investments that indicate conflicting private information and would damage their reputation. This effect can lead to inefficient investment decisions and make marking to market less desirable when market prices are more informative.
- Subjects :
- Investment Decisions
Agency Problem
JEL: M - Business Administration and Business Economics • Marketing • Accounting • Personnel Economics/M.M4 - Accounting and Auditing/M.M4.M41 - Accounting
[SHS.GESTION]Humanities and Social Sciences/Business administration
JEL: D - Microeconomics/D.D8 - Information, Knowledge, and Uncertainty/D.D8.D81 - Criteria for Decision-Making under Risk and Uncertainty
Marking to Market
JEL: G - Financial Economics/G.G3 - Corporate Finance and Governance/G.G3.G31 - Capital Budgeting • Fixed Investment and Inventory Studies • Capacity
Reputation
Subjects
Details
- Language :
- English
- Database :
- OpenAIRE
- Accession number :
- edsair.od.......177..4c3c2917293d4a4d8b86e6a6e124ded0