Lu, Tong2022-12-29May 20222022-12-08https://hdl.handle.net/10657/13130In this paper, I ask the question whether accounting regulation is beneficial or detrimental from the angle of investors’ information processing behaviors. It is well established that managers engage in various kinds of reporting manipulations, and the rewards from manipulations are determined by how investors, guided by their experiences, react to reported information. Based on the view that accounting disciplines unmanipulated patterns in financial information, I analyze managers’ manipulation incentives in an unregulated economy versus in a regulated economy and examine the efficiency implications of accounting regulation, conditional on different types of investor experience. I find that 1) while accounting regulation generally improves investment efficiency, it can impair investment efficiency and lead to more managerial manipulations; 2) investor sophistication may, but not always, strengthen the effects of accounting regulation; 3) accounting regulation may induce investors to act more conservatively; and 4) optimal accounting regulation varies with investor experience and often features a corner level of stringency. A number of implications are also discussed.application/pdfengThe author of this work is the copyright owner. UH Libraries and the Texas Digital Library have their permission to store and provide access to this work. Further transmission, reproduction, or presentation of this work is prohibited except with permission of the author(s).Accounting regulationPast experienceEvaluation methodManagerial manipulationInvestor sophistication2022-12-29Thesisborn digital