ECN 204 Lecture Notes - Lecture 6: Credit Risk, London Agreement On German External Debts, Financial Statement
Document Summary
Chapter 8 the efficient contracting approach to decision usefulness (pg. Efficient corporate governance (efficient contracting and responsible manager performance) important role for financial reporting. Contracts with decision usefulness (ch 3 and ch 7) Contracts must be efficient because a firm can be defined by contracts (benefits vs costs) Look @ legal and institutional environment, technology, and competition. Understand and predict managerial accounting policy choice in different circumstances and across different firms, and how financial accounting can contribute to contract efficiency. Efficient markets theory contrasts with this theory in that manager interest arises independently of whether different accounting policies affect cash flow. Managers are rational can be biased so accounting policies through efficient contracting and stewardship (protects debtholders and shs from managers) Confirmatory role: confirm or disconfirm announcements made by management during the year, like earnings forecasts (ni plays this role) Contract theory policies differs from investor policies. Conflict resolution: management"s interest incorporated into accounting standards this this (or due process)
