Question: If net income is an unbiased and noisy measure of

If net income is an unbiased and noisy measure of manager performance, less noise enables a more efficient compensation contract. Explain why. How can accountants reduce noise in net income when net income is an unbiased payoff predictor? Does the argument that less noise enables more efficient compensation contracting change if the assumption that net income is unbiased is dropped? Why?


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  • CreatedSeptember 09, 2014
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