The Demand for Accounting Conservatism for Management Control

• Main Authors: KWON, Young Koan, Newman, P., Suh, Y.
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2001
• Subjects: Accounting; Business Law, Public Responsibility, and Ethics
• Online Access: https://ink.library.smu.edu.sg/soa_research/619; http://dx.doi.org/10.1023/A:1011330003876
• Institution: Singapore Management University

We show that conservative financial reporting arises naturally in principal-agent settings as a means of efficiently motivating agents when the penalties that can be imposed on agents are limited. We consider an accounting system whose reports are used for contracting and whose parameters are contro...