Manipulative overconfidence and the cost of unbiased reporting

Nikolaj Niebuhr Lambertsen

Accounting and Business Research, 2025, vol. 55, issue 2, 139-155

Abstract: I study earnings management in a principal-agent model where the agent is overconfident in their ability to manage earnings, and the principal may induce the agent to communicate earnings truthfully. Without communication, overconfidence causes an increase in earnings management and incentive pay and may lead to a Pareto decrease in social welfare. Through communication, the principal can deter earnings management, and overconfidence increases the agent's total compensation at the expense of firm value. When the agent becomes significantly overconfident, communication loses value, and this causes a spike in earnings management.

Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1080/00014788.2023.2288578 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:acctbr:v:55:y:2025:i:2:p:139-155

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RABR20

DOI: 10.1080/00014788.2023.2288578

Access Statistics for this article

Accounting and Business Research is currently edited by Vivien Beattie

More articles in Accounting and Business Research from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().