Optimal penalty and accounting policy

Masatomo Akita; Yusuke Osaki

doi:10.1080/00036846.2016.1176113

Optimal penalty and accounting policy

Masatomo Akita, Yusuke Osaki^*

^*Corresponding author for this work

Research output: Contribution to journal › Article › peer-review

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 language	English
Pages (from-to)	5292-5299
Number of pages	8
Journal	Applied Economics
Volume	48
Issue number	54
DOIs	https://doi.org/10.1080/00036846.2016.1176113
Publication status	Published - 2016 Nov 19
Externally published	Yes

Keywords

Accounting policy
adverse selection
audit
investment efficiency
optimal penalty

ASJC Scopus subject areas

Economics and Econometrics

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10.1080/00036846.2016.1176113

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KW - investment efficiency

KW - optimal penalty

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Optimal penalty and accounting policy

Abstract

Keywords

ASJC Scopus subject areas

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