Financial Reporting Environment Harvard Case Solution & Analysis

Provides a basis for understanding the role of financial reporting and the various intermediaries as mechanisms to reduce both adverse selection and moral hazard problems in the capital markets. Financial statements to reduce adverse selection by providing key information for investors and their agents before you make the initial decisions of the resource allocation of capital. Subsequently, after the capital is allocated particular businesses, financial statements to reduce moral hazard between managers and investors, providing information used in contracts between investors and managers to reduce conflicts of interest. Various institutional arrangements and information intermediaries to control and restrict the manipulation of reported information and limit the ability of managers to act in their own interests, not the interests of investors, managers. They also improve information products, reduce incentives conflicts and enable capital markets to function effectively and efficiently, directing economic savings to the most productive opportunities. "Hide
by Krishna G. Palepu, Paul M. Healy, Amy P. Hutton, Robert S. Kaplan 11 pages. Publication Date: September 12, 2001. Prod. #: 102029-PDF-ENG

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