Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5062625 | Economics Letters | 2006 | 5 Pages |
Abstract
We analyze a model where both a regulator and a firm may detect and stop bad projects. We show that full auditing by the regulator may be socially suboptimal even with zero auditing costs. The reason is that the firm's own auditing incentive may be crowded out when protected by limited liability. The optimal policy depends on the firm's wealth.
Keywords
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Eberhard Feess, Christoph Schumacher,