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Monitor Reputation and Transparency

Author

Listed:
  • Ivan Marinovic

    (Stanford University)

  • Martin Szydlowski

    (University of Minnesota)

Abstract
We study the disclosure policy of a regulator overseeing a monitor with reputation concerns, such as a bank or an auditor. The monitor faces a manager, who chooses how much to manipulate given the monitor’s reputation. Reputational incentives are strongest for intermediate reputations and uncertainty about the monitor is valuable. Instead of providing transparency, the regulator’s disclosure keeps the monitor’s reputation intermediate, even at the cost of diminished incentives. Beneficial schemes feature random delay. Commonly used ones, which feature immediate disclosure or fixed time delay, destroy reputational incentives. Surprisingly, the regulator discloses more aggressively when she has better enforcement tools.

Suggested Citation

  • Ivan Marinovic & Martin Szydlowski, 2019. "Monitor Reputation and Transparency," 2019 Meeting Papers 125, Society for Economic Dynamics.
    • Handle: RePEc:red:sed019:125
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    File URL: https://red-files-public.s3.amazonaws.com/meetpapers/2019/paper_125.pdf
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    References listed on IDEAS

    as
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