Marking to Market versus Taking to Market

Guillaume Plantin and Jean Tirole

American Economic Review, 2018, vol. 108, issue 8, 2246-76

Abstract: Building on the idea that accounting matters for corporate governance, this paper studies the equilibrium interaction between the measurement rules that firms find privately optimal, firms' governance, and the liquidity in the secondary market for their assets. This equilibrium approach reveals an excessive use of market-value accounting: corporate performance measures rely excessively on the information generated by other firms' asset sales and insufficiently on the realization of a firm's own capital gains. This dries up market liquidity and reduces the informativeness of price signals, thereby making it more costly for firms to overcome their agency problems.

JEL-codes: D21 D82 G34 G38 M41 M48 (search for similar items in EconPapers)
Date: 2018
Note: DOI: 10.1257/aer.20161749
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Citations: View citations in EconPapers (9)

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Related works:
Working Paper: Marking to market versus taking to market (2018)
Working Paper: Marking to market versus taking to market (2018)
Working Paper: Marking to Market versus Taking to Market (2016)
Working Paper: Marking to Market versus Taking to Market (2016)
Working Paper: Marking to market versus taking to market (2015)
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