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The Acquiescent Gatekeeper: Reputational Intermediaries, Auditor Independence And The Governance Of Accounting, John C. Coffee Jr.
The Acquiescent Gatekeeper: Reputational Intermediaries, Auditor Independence And The Governance Of Accounting, John C. Coffee Jr.
Faculty Scholarship
The role of "gatekeepers" as reputational intermediaries who can be more easily deterred than the principals they serve has been developed in theory, but less often examined in practice. Initially, this article seeks to define the conditions under which gatekeeper liability is likely to work – and, correspondingly, the conditions under which it is more likely to fail. Then, after reviewing the recent empirical literature on earnings management, it concludes that the independent auditor does not today satisfy the conditions under which gatekeeper liability should produce high law compliance. A variety of explanations – poor observability, implicit collusion, and high …
A Defense Of Shareholder Favoritism, Stephen J. Choi, Eric L. Talley
A Defense Of Shareholder Favoritism, Stephen J. Choi, Eric L. Talley
Faculty Scholarship
This paper considers the efficiency implications of managerial "favoritism" towards block shareholders of public corporations. While favoritism can take any number of forms (including the payment of green-mail, diversion of opportunities, selective information disclosure, and the like), each may have the effect (if not the intent) of securing a block shareholder's loyalty in order to entrench management. Accordingly, the practice of making side payments is commonly perceived to be contrary to other shareholders' interests and, more generally, inefficient. In contrast to this received wisdom, we argue that when viewed ex ante, permissible acts of patronage toward block shareholders may play …