Summary Financial Accounting Theory (R. Scott)
Free market theorists believe markets function best without government intervention.
Also believe, Maximum efficiency = allowing supply and demand to dictate market behavior
"Accounting Information" industry would find equilibrium price from natural supply and demand
The market will identify information it desires, and incentivize the production of it.
Accounting info is a public good due to the 'free-rider' problem, and results in less incentive for the
information to be purchased
Non-disclosed information has value, therefore companies see value in under-producing info and
selling it at a high price
, Terms in this set (18)
Free market theorists believe markets function best without government
intervention.
Also believe, Maximum efficiency = allowing supply and demand to dictate market
behavior
"Accounting Information" industry would find equilibrium price from natural supply
Describe the theory of efficient markets and demand
and its implications for accounting.
The market will identify information it desires, and incentivize the production of it.
Accounting info is a public good due to the 'free-rider' problem, and results in
less incentive for the information to be purchased
Non-disclosed information has value, therefore companies see value in under-
producing info and selling it at a high price
Demand for financial info is for two primary purposes: Stewardship and decision-
making
Agency theory focuses on the trusting relationship between the the principal's
(owner) wealth and the agent (manager)
Describe agency theory and discuss its
relevant applications to accounting.
Argument: If accounting were deregulated, production of sufficient information
for the agent (manager) is still needed
Argument cont.: regulation creates 'standards overload' causing overproduction
of accounting information resulting in a market inefficiency
Free market theorists believe markets function best without government intervention.
Also believe, Maximum efficiency = allowing supply and demand to dictate market behavior
"Accounting Information" industry would find equilibrium price from natural supply and demand
The market will identify information it desires, and incentivize the production of it.
Accounting info is a public good due to the 'free-rider' problem, and results in less incentive for the
information to be purchased
Non-disclosed information has value, therefore companies see value in under-producing info and
selling it at a high price
, Terms in this set (18)
Free market theorists believe markets function best without government
intervention.
Also believe, Maximum efficiency = allowing supply and demand to dictate market
behavior
"Accounting Information" industry would find equilibrium price from natural supply
Describe the theory of efficient markets and demand
and its implications for accounting.
The market will identify information it desires, and incentivize the production of it.
Accounting info is a public good due to the 'free-rider' problem, and results in
less incentive for the information to be purchased
Non-disclosed information has value, therefore companies see value in under-
producing info and selling it at a high price
Demand for financial info is for two primary purposes: Stewardship and decision-
making
Agency theory focuses on the trusting relationship between the the principal's
(owner) wealth and the agent (manager)
Describe agency theory and discuss its
relevant applications to accounting.
Argument: If accounting were deregulated, production of sufficient information
for the agent (manager) is still needed
Argument cont.: regulation creates 'standards overload' causing overproduction
of accounting information resulting in a market inefficiency
