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Accounting Information in Financial Contracting: The Incomplete Contract Theory Perspective
Author(s) -
CHRISTENSEN HANS B.,
NIKOLAEV VALERI V.,
WITTENBERGMOERMAN REGINA
Publication year - 2016
Publication title -
journal of accounting research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 6.767
H-Index - 141
eISSN - 1475-679X
pISSN - 0021-8456
DOI - 10.1111/1475-679x.12108
Subject(s) - perspective (graphical) , accounting information system , contract theory , accounting , incomplete contracts , business , complete information , work (physics) , finance , economics , actuarial science , microeconomics , computer science , mechanical engineering , artificial intelligence , incentive , engineering
This paper reviews theoretical and empirical work on financial contracting that is relevant to accounting researchers. Its primary objective is to discuss how the use of accounting information in contracts enhances contracting efficiency and to suggest avenues for future research. We argue that incomplete contract theory broadens our understanding of both the role accounting information plays in contracting and the mechanisms through which efficiency gains are achieved. By discussing its rich theoretical implications, we expect incomplete contract theory to prove useful in motivating future research and in offering directions to advance our knowledge of how accounting information affects contract efficiency.