Financialaccountingtheorychapter实证会计理论.pptx

会计学1Financial accounting theory chapter实证会计实证会计(kui j)理论理论第一页，共44页。Copyright 2000 McGraw-Hill Book Co.Aust.PPT t/a Financial Accounting Theory by Deegan7.2Learning Objectivesn nIn this chapter you will be introduced to n nhow a positive theory differs from a normative theoryn nthe origins of Positive Accounting theoryn nthe perceived role of accounting in minimising the transaction costs of an organisationn nhow accounting can be used to reduce the costs associated with various political processes 第1页/共44页第二页，共44页。Copyright 2000 McGraw-Hill Book Co.Aust.PPT t/a Financial Accounting Theory by Deegan7.3Learning Objectivesn nhow particular accounting-based agreements with parties such as debtholders and managers can provide incentives for managers to manipulate accounting numbersn nsome criticisms of PAT第2页/共44页第三页，共44页。Copyright 2000 McGraw-Hill Book Co.Aust.PPT t/a Financial Accounting Theory by Deegan7.4Positive compared to normative theories n nA positive theory seeks to explain and predict particular phenomenan nnormative theories prescribe how a particular practice should be undertakenn nthe prescription might depart from existing practice第3页/共44页第四页，共44页。Copyright 2000 McGraw-Hill Book Co.Aust.PPT t/a Financial Accounting Theory by Deegan7.5Positive Accounting Theory definedn nPATis concerned with explaining accounting practice.It is designed to explain and predict which firms will and which firms will not use a particular methodbut it says nothing as to which method a firm should use 第4页/共44页第五页，共44页。Copyright 2000 McGraw-Hill Book Co.Aust.PPT t/a Financial Accounting Theory by Deegan7.6PAT definedcontinuedn nFocuses on relationships between various individuals and how accounting is used to assist in the functioning of these relationshipsn nexamples of relationships:n nowners and managersn nmanagers and the firms debt providers第5页/共44页第六页，共44页。Copyright 2000 McGraw-Hill Book Co.Aust.PPT t/a Financial Accounting Theory by Deegan7.7Assumptions underlying PATn nAll individuals action is driven by self-interest and individuals will act in an opportunistic manner to the extent that the actions will increase their wealthn ndoes not incorporate notions of loyalty or morality第6页/共44页第七页，共44页。Copyright 2000 McGraw-Hill Book Co.Aust.PPT t/a Financial Accounting Theory by Deegan7.8Origins of PATn nStarted coming to prominence in mid 1960sn nparadigm shift from normative theoriesn ndominant research paradigm in 1970s and 1980sn nshift resulted from US reports on business education,and improved computing facilities enabling large-scale statistical analysis第7页/共44页第八页，共44页。Copyright 2000 McGraw-Hill Book Co.Aust.PPT t/a Financial Accounting Theory by Deegan7.9Origins of PATcapital markets researchn nDevelopment of Efficient Markets Hypothesis(EMH)by Fama and othersn ncapital markets react in an efficient and unbiased manner to publicly available information n nBall and Brown(1968)paper was crucial to the acceptance of the positive research paradigmn ninvestigated stock market reaction to accounting earnings announcements第8页/共44页第九页，共44页。Copyright 2000 McGraw-Hill Book Co.Aust.PPT t/a Financial Accounting Theory by Deegan7.10Origins of PATcapital markets researchcontinuedn nPrice of a security based on beliefs about present value of future cash flowsn nBall and Brown found that earnings announcements impacted share pricesn nevidence that historical cost information is useful to the marketn nLiterature unable to explain why particular accounting methods selected第9页/共44页第十页，共44页。Copyright 2000 McGraw-Hill Book Co.Aust.PPT t/a Financial Accounting Theory by Deegan7.11Origins of PATAgency theory n nExplained why the selection of particular accounting methods might mattern nfocused on the relationships between principals and agentsn neg.shareholders and managersn ninformation asymmetries create much uncertaintyn ntransaction costs and information costs exist第10页/共44页第十一页，共44页。Copyright 2000 McGraw-Hill Book Co.Aust.PPT t/a Financial Accounting Theory by Deegan7.12Agency Relationshipn nDefined by Jensen and Meckling(1976)n na contract under which one or more(principals)engage another person(the agent)to perform some service on their behalf which involves delegating some decision-making authority to the agentn nrelies upon traditional economics literaturen nassumptions of self-interest and wealth maximisation第11页/共44页第十二页，共44页。Copyright 2000 McGraw-Hill Book Co.Aust.PPT t/a Financial Accounting Theory by Deegan7.13Price protectionn nIn the absence of contractual mechanisms to restrict agents potentially opportunistic behaviour the principal will pay the agent a lower salaryn ncompensates principals for adverse actionsn nagents will therefore have incentives to enter contracts which appear to limit actions detrimental to agents第12页/共44页第十三页，共44页。Copyright 2000 McGraw-Hill Book Co.Aust.PPT t/a Financial Accounting Theory by Deegan7.14Agency costsn nMonitoring costsn ncosts of monitoring agents behaviourn neg.auditing financial statements n nbonding costsn ncosts involved in agents bonding their behaviour to expectations of principalsn neg.preparing financial statementsn nresidual lossn ntoo costly to remove all opportunistic behaviour第13页/共44页第十四页，共44页。Copyright 2000 McGraw-Hill Book Co.Aust.PPT t/a Financial Accounting Theory by Deegan7.15Role of accounting in contracts n nAccounting information used to reduce agency costsn nused as monitoring and bonding mechanisms to control the efforts of self-interested agents 第14页/共44页第十五页，共44页。Copyright 2000 McGraw-Hill Book Co.Aust.PPT t/a Financial Accounting Theory by Deegan7.16Key hypothesesn nThree key hypotheses frequently used in PAT literature to explain and predict support or opposition to an accounting method:n nbonus plan hypothesisn ndebt hypothesisn npolitical cost hypothesis n nresearch assumes managers will act opportunistically when selecting methods第15页/共44页第十六页，共44页。Copyright 2000 McGraw-Hill Book Co.Aust.PPT t/a Financial Accounting Theory by Deegan7.17Bonus plan hypothesisn nManagers of firms with bonus plans are more likely to use accounting methods that increase current period reported incomen nalso called management compensation hypothesis n naction increases the present value of bonuses paid to management第16页/共44页第十七页，共44页。Copyright 2000 McGraw-Hill Book Co.Aust.PPT t/a Financial Accounting Theory by Deegan7.18Debt hypothesisn nThe higher the firms debt/equity ratio,the more likely managers use accounting methods that increase incomen nalso called debt/equity hypothesisn nthe higher the debt/equity ratio,the closer the firm is to the constraints in debt covenantsn ncovenant violation results in costs of technical default第17页/共44页第十八页，共44页。Copyright 2000 McGraw-Hill Book Co.Aust.PPT t/a Financial Accounting Theory by Deegan7.19Political cost hypothesisn nLarge firms rather than small firms are more likely to use accounting choices that reduce reported profitsn nsize is a proxy variable for political attentionn nreduction of reported income is hypothesised to reduce the possibility that people will argue that the organisation is exploiting other parties第18页/共44页第十九页，共44页。Copyright 2000 McGraw-Hill Book Co.Aust.PPT t/a Financial Accounting Theory by Deegan7.20Two perspectives adopted by PAT researchn nEfficiency perspectiven nOpportunistic perspective第19页/共44页第二十页，共44页。Copyright 2000 McGraw-Hill Book Co.Aust.PPT t/a Financial Accounting Theory by Deegan7.21Efficiency Perspectiven nResearchers explain how contracting mechanisms minimise agency costs of the firmn nknown as ex ante perspectiven nmechanisms put in place up-front to minimise future agency and contracting costs n nmanagers select accounting methods which most efficiently reflect underlying firm performance第20页/共44页第二十一页，共44页。Copyright 2000 McGraw-Hill Book Co.Aust.PPT t/a Financial Accounting Theory by Deegan7.22Efficiency Perspective continuedn nPAT theorists argue that regulation forcing firms to use a particular accounting method imposes unwarranted costs第21页/共44页第二十二页，共44页。Copyright 2000 McGraw-Hill Book Co.Aust.PPT t/a Financial Accounting Theory by Deegan7.23Opportunistic perspectiven nSeeks to explain managers actions once contracts are already in placen nnot possible to write complete contracts,so managers are assumed to opportunistically act to maximise own wealthn nknown as ex post perspectiven nconsiders opportunistic actions after the fact第22页/共44页第二十三页，共44页。Copyright 2000 McGraw-Hill Book Co.Aust.PPT t/a Financial Accounting Theory by Deegan7.24Owner/manager contractingn nAssuming self-interest,owners expect managers(agent)to undertake activities not always in the interest of owners(principal)n nmanagers have access to information not always available to principalsn ninformation asymmetryn nfurther increases managers ability to undertake activities beneficial to themselvesn ncosts of divergent behaviour are agency costs第23页/共44页第二十四页，共44页。Copyright 2000 McGraw-Hill Book Co.Aust.PPT t/a Financial Accounting Theory by Deegan7.25Owner/manager contractingcontinuedn nIn the absence of controls to reduce opportunistic behaviour,agents(managers)expected to undertake activities disadvantageous to the value of the firmn nprincipals price this into the amounts they are prepared to pay the managern nmanagers may contract themselves not to consume perks so will receive higher salaryn nknown as bonding第24页/共44页第二十五页，共44页。Copyright 2000 McGraw-Hill Book Co.Aust.PPT t/a Financial Accounting Theory by Deegan7.26Methods of rewarding managersn nFixed basissalary independent of performancen nmanager may not take great risks as does not share in potential gainsn nsalary plus remuneration in part tied to firm performancen nknown as bonus schemes第25页/共44页第二十六页，共44页。Copyright 2000 McGraw-Hill Book Co.Aust.PPT t/a Financial Accounting Theory by Deegan7.27Bonus schemesn nRemuneration can be tied to:n nprofits of the firmn nsales of the firmn nreturn on assetsn nall based on output from the accounting systemn nmay also be rewarded in line with market price of the firms shares第26页/共44页第二十七页，共44页。Copyright 2000 McGraw-Hill Book Co.Aust.PPT t/a Financial Accounting Theory by Deegan7.28Accounting-based bonus plansn nAny changes in accounting methods will affect the bonuses paidn nmay occur as a result of a new accounting standard in placen ncontracts in some circumstances may be based on the old method in place so changes will not affect bonusesn ncontracts relying on accounting numbers may rely on floating GAAP第27页/共44页第二十八页，共44页。Copyright 2000 McGraw-Hill Book Co.Aust.PPT t/a Financial Accounting Theory by Deegan7.29Incentives to manipulate accounting numbersn nRewarding managers on the basis of accounting profits may induce them to manipulate accounting numbersn nwill affect their rewardsn nbonuses based on profits cause short-term rather than long-term focusn nmay affect investment in positive NPV projects if returns not expected to be consistent第28页/共44页第二十九页，共44页。Copyright 2000 McGraw-Hill Book Co.Aust.PPT t/a Financial Accounting Theory by Deegan7.30Incentives to manipulate accounting numbersevidencen nHealy(1985)found:n n managers adopt accounting methods to maximise bonus if contract rewarded managers after a pre-specified level of earnings reachedn nif income not expected to reach pre-specified minimum,managers shift earnings to future period(take a bath)第29页/共44页第三十页，共44页。Copyright 2000 McGraw-Hill Book Co.Aust.PPT t/a Financial Accounting Theory by Deegan7.31Incentives to manipulate numbersevidence continuedn nLewellen,Loderer and Martin(1987)found:n nUS managers approaching retirement are less likely to undertake R&D expenditure if rewards based on accounting-based performance measuresn nshort-term focus第30页/共44页第三十一页，共44页。Copyright 2000 McGraw-Hill Book Co.Aust.PPT t/a Financial Accounting Theory by Deegan7.32Market-based bonus schemesn nMay be more appropriate to remunerate managers in terms of market value where accounting earnings fluctuate greatlyn neg.mining,high technology R&D firmsn nmethods include:n ncash bonus based on share price increasesn nsharesn noptions to shares 第31页/共44页第三十二页，共44页。Copyright 2000 McGraw-Hill Book Co.Aust.PPT t/a Financial Accounting Theory by Deegan7.33Market-based bonus schemescontinuedn nManagers have incentives to increase the value of the firmn nProblems include:n nshare price also affected by factors beyond the control of managers,eg.general market movementsn nonly senior managers likely to have a significant impact on share value第32页/共44页第三十三页，共44页。Copyright 2000 McGraw-Hill Book Co.Aust.PPT t/a Financial Accounting Theory by Deegan7.34Choice of accounting versus market-based bonus schemesn nMore likely to be based on accounting earnings where:n nshare returns relatively more sensitive to general market movementsn nearnings have a high association with firm-specific movement in the firms share valuesn nearnings have a less positive association with market-wide movements in equity values第33页/共44页第三十四页，共44页。Copyright 2000 McGraw-Hill Book Co.Aust.PPT t/a Financial Accounting Theory by Deegan7.35Debt contractingagency costs of debtn nAgency costs of debt include:n nexcessive dividend payments,which leave fewer assets to service debtn nthe organisation may take on additional debt,with new debtholders competing with original debtholders for repayment n ninvestment in high-risk projects may not be beneficial to debt holders as they have a fixed claim第34页/共44页第三十五页，共44页。Copyright 2000 McGraw-Hill Book Co.Aust.PPT t/a Financial Accounting Theory by Deegan7.36Use of debt contractsn nIn the absence of safeguards to protect the interests of debtholders,it is assumed they will require the firm to pay higher costs of interest to compensaten nif firms contract not to pay excess dividends,take on high levels of debt or invest in risky projects,then they can attract debt at lower cost第35页/共44页第三十六页，共44页。Copyright 2000 McGraw-Hill Book Co.Aust.PPT t/a Financial Accounting Theory by Deegan7.37Australian debt contracts n nIn relation to Australian debt contracts Cotter(1998)found:n nleverage covenants frequently used in bank loan contractsn nleverage most frequently measured as the ratio of total liabilities to total tangible assetsn nprior charges covenants typically included in term loan agreements of larger firmsn nprior charges covenants defined as a percentage of total tangible assets第36页/共44页第三十七页，共44页。Copyright 2000 McGraw-Hill Book Co.Aust.PPT t/a Financial Accounting Theory by Deegan7.38Australian debt contracts continuedn nDebt to assets,interest coverage and current ratio clauses frequently in usen ninterest coverage required to be between 11/2 and 4 timesn ncurrent ratio clauses required current assets be between 1 and 2 times the size of current liabilities 第37页/共44页第三十八页，共44页。Copyright 2000 McGraw-Hill Book Co.Aust.PPT t/a Financial Accounting Theory by Deegan7.39Debt contractsmanagers incentive to manipulaten nEx post,the incentive to manipulate numbers increases as the const