Endogenous Performance Smoothing

Posted: 5 Jul 1998

See all articles by Joel S. Demski

Joel S. Demski

University of Florida - Fisher School of Accounting

Date Written: March 1996

Abstract

A model of endogenous performance smoothing is presented and analyzed. A manager, or agent, labors across two periods, where output in each period is a Bernoulli process with an evident revenue recognition interpretation. Smoothing may be possible, and this possibility may be linked to the manager's supply of inputs subject to moral hazard. If so, the efficient contract design motivates smoothing. Less information is conveyed to the principal for valuation purposes, simply because doing so lessens the moral hazard problem.

JEL Classification: M41

Suggested Citation

Demski, Joel S., Endogenous Performance Smoothing (March 1996). Available at SSRN: https://ssrn.com/abstract=2604

Joel S. Demski (Contact Author)

University of Florida - Fisher School of Accounting ( email )

Warrington College of Business
PO Box 117166
Gainesville, FL 32611-7166
United States
352-392-7597 (Phone)
352-378-1079 (Fax)

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