Marking to market versus taking to market

Guillaume Plantin () and Jean Tirole
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Guillaume Plantin: ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique

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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.

Keywords: TO-MARKET; Auctions; Equilibrium; Liquidity; Entry (search for similar items in EconPapers)
Date: 2018-08
Note: View the original document on HAL open archive server: https://hal.science/hal-03263648v1
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Published in American Economic Review, 2018, 108 (8), pp.2246-2276. ⟨10.1257/aer.20161749⟩

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Related works:
Journal Article: 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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Persistent link: https://EconPapers.repec.org/RePEc:hal:spmain:hal-03263648

DOI: 10.1257/aer.20161749

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