An economic inquiry into accounting recognition.
详细信息
文摘
We begin our inquiry with a careful review of the historical and contemporary literature on the recognition issue. The foundation of the inquiry rests on the academic literature of information content and accounting structure. The analysis is set in a multi-period agency model where accounting is a source of information for contracting purposes. In chapter 3,we focus on two complementary sources of information: one is an accounting source which partially but credibly conveys the agent's private information through accounting recognition and the other is an unverified communication by the agent (i.e.,a self-report). In a simple setting with no communication,alternative labor market frictions lead to alternative recognition policies. When the agent is allowed to communicate his private information,accounting signals serve as a veracity check on the agent's self-report. Finally,such communication sometimes makes delaying the recognition desirable. In chapter 4,we study performance manipulation incentives where we allow the manager to shift a portion of the reported performance measures (e.g.,accruals) across periods through early or late recognition rules. Under the conditions of limited communication and linear contracts,performance management may turn out to be equilibrium behavior that is encouraged by the principal. From the predictions of the model,we drive empirical implications for the empirical investigation of performance management (e.g.,detecting income smoothing) and suggest new statistical procedures. Simulation results are provided regarding the effectiveness of the proposed procedures. From our analysis,we see contracting and confirmatory roles of accounting as its comparative advantage. As a source of information,accounting is valuable because accounting reports are credible,comprehensive,and subject to careful and professional judgment. In addition,tolerating performance management is an equilibrium response to the contracting and communication limitations.