اطلاعات حسابداری مالی و اداره امور شرکت ها

This paper reviews and proposes additional research concerning the role of publicly reported financial accounting information in the governance processes of corporations. We first discuss research on the use of financial accounting in managerial incentive plans and explore future research directions. We then propose that governance research be extended to explore more comprehensively the use of financial accounting information in additional corporate control mechanisms, and suggest opportunities for expanding such research. We also propose cross-country research to investigate more directly the effects of financial accounting information on economic performance through its role in governance and more generally.

In this paper we evaluate and propose additional economics-based empirical research concerning the governance role of financial accounting information. We define the governance role of financial accounting information as the use of externally reported financial accounting data in control mechanisms that promote the efficient governance of corporations. We adopt the classic agency perspective that the separation of corporate managers from outside investors involves an inherent conflict. Corporate control mechanisms are the means by which managers are disciplined to act in the investors’ interest. Control mechanisms include both internal mechanisms, such as managerial incentive plans, director monitoring, and the internal labor market, and external mechanisms, such as outside shareholder or debtholder monitoring, the market for corporate control, competition in the product market, the external managerial labor market, and securities laws that protect outside investors against expropriation by corporate insiders. Financial accounting information is the product of corporate accounting and external reporting systems that measure and publicly disclose audited, quantitative data concerning the financial position and performance of publicly held firms. Financial accounting systems provide direct input to corporate control mechanisms, as well as providing indirect input to corporate control mechanisms by contributing to the information contained in stock prices. A fundamental objective of governance research in accounting is to provide evidence on the extent to which information provided by financial accounting systems mitigate agency problems due to the separation of managers and outside investors, facilitating the efficient flow of scarce human and financial capital to promising investment opportunities. We believe that governance research is important for developing a complete understanding of the impact of financial accounting information on the allocation and utilization of resources in an economy. The largest body of governance research in accounting concerns the role of financial accounting information in managerial incentive contracts. The heavy emphasis on managerial compensation derives from the widespread use of compensation contracts in publicly traded U.S. corporations, the availability of top executive compensation data in the U.S. as a result of existing disclosure requirements, and the success of principal–agent models in supplying testable predictions of the relations between available performance measures and optimal compensation contracts. In Section 2, we review and critique the existing compensation literature in accounting, including the literature examining the role of accounting information in determining managerial turnover. Our discussion develops the theoretical framework underlying much of this work and evaluates existing empirical evidence. We also provide an historical overview to trace the economic roots of compensation research in accounting, discuss empirical research concerning the prevalence and trends in the use of financial accounting numbers in managerial compensation plans, and offer suggestions for future compensation research. While Section 2 focuses on one particular control mechanism, managerial compensation plans, researchers also have examined the role of accounting information in the operation of other governance mechanisms. Examples include takeovers (Palepu, 1986), proxy contests (DeAngelo, 1988), boards of directors (Dechow et al., 1996; Beasley, 1996), shareholder litigation (Kellogg, 1984; Francis et al., 1994; Skinner, 1994), debt contracts (Smith and Warner, 1979; Leftwich, 1981; Press and Weintrop, 1990; Sweeney, 1994), and the audit function (Feltham et al., 1991; DeFond and Subramanyam, 1998).1 A detailed review of this extended literature is beyond the scope of this paper. However, in Section 3, we provide examples of such research and suggest ideas for direct extensions. These suggestions include a more comprehensive investigation of the use of financial accounting information in a variety of control mechanisms, the consideration of interactions among control mechanisms, and the impact of limitations of financial accounting information on the structure of control mechanisms. The research discussed in 2 and 3 suggests that the governance use of financial accounting information likely affects the allocation and utilization of resources in an economy. In Section 4, we propose empirical research to investigate more directly the effects of financial accounting information on economic performance, with an emphasis on the governance effects of accounting. We begin Section 4 by discussing three channels through which financial accounting information can affect the investments, productivity, and value added of firms. The first channel involves the use of financial accounting information to identify good versus bad projects by managers and investors (project identification).2 The second channel is the use of financial accounting information in corporate control mechanisms that discipline managers to direct resources toward projects identified as good and away from projects identified as bad (governance channel). The third channel is the use of financial accounting information to reduce information asymmetries among investors (adverse selection). The research proposed in Section 4 concerns four issues. The first issue is the aggregate economic effects of financial accounting information through all three channels. The second issue is the economic effects of financial accounting information specifically through the governance channel. The third issue is how the economic effects of financial accounting information through all channels, and through the governance channel alone, vary with other factors, including the auditing regime, communication networks, financial analyst following, relative importance of financing from capital markets relative to banks, legal environment and other corporate control mechanisms, the concentration of production within versus across firms, political influence over business activities, and human capital. The fourth issue is how the economic effects of financial accounting data through the governance channel, and in total, vary with specific properties of financial accounting systems. Cross-country designs represent a powerful setting for investigating the four issues proposed in Section 4 because of significant cross-country differences in both financial accounting regimes and economic performance. In addition, vast cross-country differences in the legal protection of investors’ rights, communication networks, and other institutional characteristics enable researchers to explore how the economic effects of financial accounting information vary with other factors. Recent research in economics has laid important groundwork for the research proposed in Section 4. Economic and finance theories linking information, financial development, and economic growth motivate investigation of the relation between financial accounting information and economic performance. And recent empirical research in economics and finance has developed designs and databases for testing the cross-country relation between a variety of institutional characteristics and economic performance. Furthermore, this emerging literature in economics and finance has generated new evidence that the protection of investors against expropriation by corporate insiders is an important economic issue. La Porta et al (1997) and La Porta et al (1998) document substantial cross-country differences in the protection of investors against expropriation by insiders from laws and their enforcement. Beginning with these influential papers, there has been a surge of empirical research concerning the economic effects of the differential legal protection of investors’ rights from country to country.3 Collectively, this research documents a significant relation between a country's protection of investors against expropriation by corporate insiders and the domestic development and efficiency of financial markets, costs of external capital, and economic growth and efficiency. Such evidence supports the La Porta et al (1997) and La Porta et al (1998) view that the protection of investors against expropriation by insiders has important economic effects. Together this evidence, along with new evidence of a positive relation between financial accounting information and economic performance (Rajan and Zingales, 1998a; Carlin and Mayer, 2000), suggest that the governance role of financial accounting information is likely to generate first-order economic effects. We expect the research proposed in Section 4 to generate new evidence on the significance of the economic effects of financial accounting information from all sources, and from the governance role of financial accounting information specifically. We also expect the proposed research to identify institutional factors that influence the total economic effects of financial accounting information, as well as the factors that influence the economic effects of financial accounting information through its governance role. Finally, we expect the proposed research to generate new evidence on the properties of high- versus low-quality financial accounting systems from the standpoint of the total economic effects, and from the standpoint of the economic effects of financial accounting information through the governance function. In Section 5, we describe the relation between governance research and other economic-based research in accounting. We argue that future research on the connection between the governance use and capital markets use of financial accounting information is important for developing a more complete understanding of the effects of financial accounting information on economic performance, and make suggestions for exploring this connection. In Section 5, we also make further suggestions for future capital markets research that naturally emerge from our consideration of the channels through which financial accounting information affects the economy, and from consideration of the potential interactions between financial accounting regimes and other institutional characteristics. In Section 6, we provide a summary, and an important caveat to help put our suggestions for future research in perspective. As we indicate there, we do not intend that our suggestions for future research be viewed as complete in terms of either the hypotheses or empirical designs that can be used to investigate the governance role of financial accounting information. Nor are we certain that our suggestions will stand up to scrutiny. Our hope is that our suggestions will stimulate other accounting researchers to reflect on new possibilities for testing the efficiency effects of financial accounting information.

We review and critique research concerning the role of accounting information in executive compensation contracts in Section 2. We conclude that the literature provides mixed results concerning the risk-incentives tradeoff implied by the classic principal–agent model, suggesting that empirical researchers should consider other theoretical structures, such as sorting models, to understand the data. Beyond these mixed results, we discuss evidence that the incentive weight on earnings in managerial compensation plans increases with the intensity with which earnings are impounded into stock price, that firms substitute away from accounting earnings towards alternative performance measures as firms’ growth opportunities increase, and that boards of directors distinguish among components of earnings in determining annual bonuses. Perhaps most striking is the recent evidence that the direct role of accounting measures in determining the compensation of top U.S. executives has been shrinking in recent years. This evidence raises a number of challenging questions for future research. Two in particular are: Why is the relative importance of accounting measures shrinking, and can cross-sectional differences in the extent of shrinkage be explained? Does this recent evidence imply that accounting information has a lower impact on managerial behavior? We make a number of additional suggestions for extending research on the role of accounting measures in managerial compensation plans throughout the discussion in Section 2. We propose two additional directions for future governance research in 3 and 4. The first direction is to explore the use of financial accounting information in additional corporate control mechanisms beyond managerial compensation contracts, the interactions among different control mechanisms, and how corporate governance structures vary with limitations of financial accounting information. The U.S. continues to be an important setting for exploring the use of financial accounting information in corporate control mechanisms because the U.S. has such a well-developed financial accounting regime, a rigorous audit regime that presumably contributes to the governance value of reported accounting data, as well as highly developed control mechanisms. We also think that it would be interesting to explore corporate control mechanisms and their use of financial accounting information in a cross-country setting. La Porta et al. (1997) document significant cross-country differences in one control mechanism—legal protection of investors’ rights against expropriation by corporate insiders. There are likely to be others, with important implications for the governance role of financial accounting information in different economies. The research proposed in Section 3 has the potential to provide new evidence of how financial accounting information potentially affects economic growth and efficiency through its use in corporate control mechanisms. Such studies would also provide new cross-country data on corporate control mechanisms for investigating the effects of financial accounting information on economic performance as proposed in Section 4. The second direction for future research is to examine directly the effects of financial accounting information on economic performance. We propose empirical research focused on four themes. The first theme is whether the availability of financial accounting information affects economic performance, and by how much. This research is expected to capture the overall effects of financial accounting information on economic performance. The second theme is to investigate the specific channels through which financial accounting information affects economic performance, with an emphasis on isolating the effects of the governance role of financial accounting information. The third theme is how the effects of financial accounting information on economic performance vary with other factors, such as the auditing regime, legal protection of investors’ rights and other corporate control mechanisms, or the relative importance of securities markets versus bank financing. The interactions between financial accounting information and corporate control mechanisms will isolate the governance effects of financial accounting information, and interactions between financial accounting regimes and other domestic institutions will provide new evidence of the determinants of the economic value of financial accounting information more generally. The fourth theme is the economic effects of disclosures of specific types, the frequency of interim reporting, and the accounting principles used to measure the disclosed items. We expect this research to provide new insights into the properties of financial accounting systems that are high- versus low quality from the standpoint of enhancing economic performance. The cross-country setting is promising for exploring these four issues concerning the effects of financial accounting information on economic performance. There are significant cross-country differences in financial accounting regimes, as well as significant cross-country differences in economic performance to explain. Furthermore, there are cross-country differences in other institutional characteristics such as the legal and political environment that enable researchers to explore how the effects of financial accounting information on economic performance vary with other factors. Recent research in economics and finance has laid the groundwork for the research suggested in Section 4. Economic and finance theories motivate testing the relation between financial accounting regimes and economic performance. Recent empirical research exploring the cross-country relation between financial development and economic performance provides guidance on research design issues and country-level data on numerous measures of economic performance and institutional factors that lower the barriers to entry for accounting researchers. Recent empirical research also provides evidence that the protection of investors against expropriation by corporate insiders is an important economic issue, as evidenced by the significant cross-country relation between the legal protection of investors against expropriation by corporate insiders and domestic development and efficiency of capital markets, cost of external capital, and economic growth. The preliminary results emerging from this literature also provide evidence of a positive relation between financial accounting information and economic performance. Together this evidence suggests that the governance role of financial accounting information is a channel through which financial accounting information is likely to contribute in an important way to economic performance. Hence, the proposed research into the governance role of financial accounting information has the potential to detect first-order economic effects. Accounting researchers’ detailed knowledge of financial accounting systems and financial accounting issues represents a comparative advantage that can and should be brought to bear on a research agenda that builds on this emerging literature in economics. There is high potential for accounting researchers to provide evidence concerning the economic effects of financial accounting information, the channels through which financial accounting information affects economic performance, the factors that influence the economic effects of financial accounting information, and the properties of high value financial accounting regimes from the standpoint of enhancing economic performance. Although there are inherent limits to the potential of this research to test causality, and to rule out the possibility that estimates of the economic effects of accounting are attributable to omitted correlated variables, this is a promising line of inquiry. In Section 5, we discuss the relation between research on the governance role of financial accounting information and other economics-based empirical research in accounting. We argue that future research concerning the connection between the governance and capital market uses of financial accounting information is important for developing a more complete understanding of the economic effects of financial accounting information, and make suggestions for exploring this connection. Finally we suggest additional ideas for future capital markets research that emerge naturally from our framework illustrated in Fig. 1 and Fig. 2. We do not intend that our suggestions for future research be viewed as “complete” either in terms of hypotheses or empirical designs that can be used to address governance issues. Nor are we sure that the preliminary suggestions above will stand up to scrutiny. Our hope at this stage is that the ideas above stimulate other accounting researchers to reflect on new possibilities for testing the effects of financial accounting information on economic efficiency.