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The Gatekeeping Expert's Dilemma

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  • Shunsuke Matsuno

Abstract

This paper studies how experts with veto power -- gatekeeping experts -- influence agents through communication. Their expertise informs agents' decisions, while veto power provides discipline. Gatekeepers face a dilemma: transparent communication can invite gaming, while opacity wastes expertise. How can gatekeeping experts guide behavior without being gamed? Many economic settings feature this tradeoff, including bank stress tests, environmental regulations, and financial auditing. Using financial auditing as the primary setting, I show that strategic vagueness resolves this dilemma: by revealing just enough to prevent the manager from inflating the report, the auditor guides the manager while minimizing opportunities for manipulation. This theoretical lens provides a novel rationale for why auditors predominantly accept clients' financial reports. Comparative statics reveal that greater gatekeeper independence or expertise sometimes dampens communication. This paper offers insights into why gatekeepers who lack direct control can still be effective.

Suggested Citation

  • Shunsuke Matsuno, 2025. "The Gatekeeping Expert's Dilemma," Papers 2511.00031, arXiv.org, revised Jan 2026.
    • Handle: RePEc:arx:papers:2511.00031
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    References listed on IDEAS

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    1. Antle, R, 1984. "Auditor Independence," Journal of Accounting Research, John Wiley & Sons, Ltd., vol. 22(1), pages 1-20.
    2. Andres Almazan & Zhaohui Chen & Sheridan Titman, 2017. "Firm Investment and Stakeholder Choices: A Top-Down Theory of Capital Budgeting," Journal of Finance, American Finance Association, vol. 72(5), pages 2179-2228, October.
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