Public reports, information acquisition by investors, and management incentives

Gerald A. Feltham, G. H.W.U. Martin

Research output: Contribution to journalArticlepeer-review


This paper initially provides a general characterization of the relative weight assigned to two performance measures in an optimal linear compensation contract in a two-task principal/agent setting. This characterization is applied to a setting in which the measures are a public report about the firm's performance (e.g., accounting earnings) and its market price. The latter reflects the public report and non-contractible investor information, whose costly acquisition is endogenously determined. The analysis considers both the gross observed price and the filtered price, which excludes the effect of the public report and represents a contractible noisy measure of the investors' non-contractible information.

Original languageEnglish (US)
Pages (from-to)155-190
Number of pages36
JournalReview of Accounting Studies
Issue number2
StatePublished - 2000
Externally publishedYes


  • Congruence
  • Investor information acquisition
  • Multiple tasks
  • Performance evaluation

ASJC Scopus subject areas

  • Accounting
  • General Business, Management and Accounting

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