On the effects of the degree of discretion in reporting managerial performance

We consider a principal-agent setting in which a manager’s compensation depends on a noisy performance signal, and the manager is granted the right to choose an (accounting) method to determine the value of the performance signal. We study the effect of the degree of such reporting discretion, measured by the number of acceptable methods, on the optimal contract, the expected cost of compensation, and the manager’s expected utility. We find that a minimal degree of discretion may be necessary for successful contracting. We also find that while an increase in reporting discretion never harms the manager, the effect on the expected cost of compensation is more subtle. We identify three main effects of increased reporting discretion and characterize the conditions under which the aggregate of these three effects will lead to a higher or lower cost of compensation. Finally, we find that when reporting discretion induces costly effort on the part of the manager, the optimal degree of discretion can be higher than when it is costless

Separation – integration – and now …? - An historical perspective on the relationship between German management accounting and financial accounting

German accounting has traditionally followed a dual ledger approach with strictly separated internal cost accounting, as the basis for management information, and external financial accounting focusing on creditor protection and based on the commercial law. However, the increased adoption of integrated accounting system implies a significant change in the relationship between financial and management accounting systems. We use Hegelian dialectic to trace the historical development of German accounting from separated systems towards antithetical propositions of full integration, and the emergence of partial integration as the synthesis of this transformation process. For this reason, our paper provides a comprehensive analysis of the literature on the relationship between financial and management accounting in Germany. On this basis, we elaborate how financial accounting in Germany has been shaped by its economic context and legislation, and how financial accounting – accompanied by institutional pressures – in turn influenced management accounting. We argue that the changing relationship between management and financial accounting in the German context illustrates how current accounting practice is shaped not only by its environment, but also by its historical path. Based on this reasoning, we discuss several avenues for future research

Consumer Informedness and Firm Information Strategy

Consumer informedness plays a critical role in determining consumer choice in the presence of infor-mation technology (IT) deployed by competing firms in the marketplace. Using data collected through a series of stated choice experiments in two different research contexts, we examine how consumer charac-teristics and observed behaviors moderate the influence of price and product informedness on consumer choice. The results indicate that different types of consumer informedness amplify different consumer behaviors in specific consumer segments. In particular, we found that price informedness is more influen-tial among consumers in the commodity segment. They exhibit greater trading down behavior, which rep