POSITIVE THEORY AND

CAPITAL MARKET RESEARCH

&
A POSITIVE THEORY
OF ACCOUNTING
DISCRETION
Kelompok 1 :
Pandu Ambar Aci Annisa Athfi - Dias

POSITIVE THEORY AND CAPITAL

MARKET RESEARCH

PHILOSOPHY of POSITIVE ACCOUNTING

THEORY
Philosophy

PHILOSOPHY of POSITIVE ACCOUNTING

THEORY

STRENGTHS of POSITIVE THEORY

1

SCOPE of POSITIVE ACCOUNTING

THEORY

CAPITAL MARKET RESEARCH and THE

EFFICIENT MARKETS HYPOTHESIS
Penelitian

CAPITAL MARKET RESEARCH and THE

EFFICIENT MARKETS HYPOTHESIS

CAPITAL MARKET RESEARCH and THE

EFFICIENT MARKETS HYPOTHESIS

CAPITAL MARKET RESEARCH and THE

EFFICIENT MARKETS HYPOTHESIS
VS
Sementara
Capital market research (CMR)

CAPITAL MARKET RESEARCH and THE

EFFICIENT MARKETS HYPOTHESIS
Asumsi

DAMPAK PENGUMUMAN LABA AKUNTANSI

TERHADAP HARGA SAHAM

PENGARUH PENELITIAN INFORMASI LABA

TERHADAP HARGA SAHAM ( BALL & BROWNS)
Laba akuntansi historis mengandung informasi yang cukup berarti.

KETIDAK SEIMBANGAN INFORMASI DAN

BESARNYA PERUSAHAAN

BEBERAPA FAKTOR YANG MEMPENGARUHI

EARNING RESPON COEFICIENT

STRATEGI PERDAGANGAN
Berdasarkan

MECHANISTIC OR BEHAVIOURAL EFFECT

Cosmetic accounting

Leftwich

Two hypotheses

Market reacted mechanistically to changes in

accounting numbers, regardless whether they
were cosmetic or whether they had cash flow
implications
Market ignored accounting changes which had
no cash flow consequences

MECHANISTIC OR BEHAVIOURAL EFFECT

Manipulating
accounting
numbers:

MECHANISTIC OR BEHAVIOURAL EFFECT

Detecting the quality and probability of accounting
management :

A POSITIVE THEORY
OF ACCOUNTING DISCRETION

BACKGROUND: EARLY DEMAND FOR

THEORY
Information
Capital
Howmarkets
arehypothesis
accounting
research
could
policy
inconclusive
not
choices
explain
made?
all observations
Why do managers prepare financial reports?
Observations of accounting policy choice

CONTRACTING THEORY
The firm as a legal nexus of contractual relationships

AGENCY THEORY

AGENCY THEORY
Firms can be

AGENCY THEORY

AGENCY THEORY
Agency costs can be categorised
into:
1.

Monitoring Costs the cost of

observing the agents behaviour

2.

Auditing costs

Bonding Costs Costs borne by the

agent (e.g. manager) as a result of
aligning their interests with the principal
(e.g. owners)

Manager has to prepare financial reports (a

cost to the manager in terms of time and
effort)

AGENCY THEORY
Agency costs can be categorised
into (continued):
3.

Residual Loss loss associated with

not being able to fully align the
interests of the principal with the
agent

AGENCY THEORY
Price Protection (

MANAGER-SHAREHOLDER AGENCY
RELATIONSHIPS

MANAGER-SHAREHOLDER AGENCY
RELATIONSHIPS

MANAGER-SHAREHOLDER AGENCY
RELATIONSHIPS
Reducing the agency costs of equity
Bonuses are usually tied to firm
performance in some way to motivate
managers to act in the owners interest
Bonuses can be paid in cash and/or
shares/share options
Bonuses can be tied to:
1. Accounting numbers(such as net
income, sales, return on assets)
2. Share price (market based performance
measure)

SHAREHOLDER-DEBTHOLDER AGENCY
RELATIONSHIPS
Agency costs of debt

SHAREHOLDER-DEBTHOLDER AGENCY
RELATIONSHIPS

Debt-holders can Price Protect via

increased interest charges or reduced
amounts provided
The interests of shareholders can be
bonded to those of debtholders via
restrictions in lending agreements
(Loan Covenants)
Covenants often rely on numbers
contained in financial statements
Covenants usually restrict the
behaviour of managers acting on

EX POST OPPORTUNISM VERSUS

EX ANTE EFFICIENT CONTRACTING
Contracts provide incentives for
agents to act against principals
interest
Opportunistic perspective

ex post (after contracts finalised)

incomplete contracts
bonus plan hypothesis
debt-equity hypothesis

Efficient contracting perspective

EX POST OPPORTUNISM VERSUS

EX ANTE EFFICIENT CONTRACTING
Efficient contracting perspective

INFORMATION PERSPECTIVE
AND SIGNALLING

INFORMATION PERSPECTIVE
AND SIGNALLING
Aligned with the information hypothesis

POLITICAL PROCESSES
The firm and parties interested in the firm

POLITICAL PROCESSES
Political costs wealth transfers

EMPIRICAL TESTS
Testing the opportunistic and political cost hypothesis

EMPIRICAL TESTS
Empirical tests tests using contract
details (Healy)

Figure 10.1: Allocation of funds to the bonus pool,

based on accounting profit

EMPIRICAL TESTS
Empirical tests tests using contract
details (Healy)

Figure 10.2: Accounting accruals as a function of

bonus plan specifications

EMPIRICAL TESTS
Lemke & Page
Panchapakesan
Ali & Kumar
DeAngelo
Liberty & Zimmerman
Refining the specification of political costs
Wong
Godfrey & Jones

EMPIRICAL TESTS

EVALUATION OF THE THEORY

McKee, Bell & Boatsman
Christie

Methodological and statistical criticisms

empirical evidence weak and inconclusive
Leftwich

EVALUATION OF THE THEORY

Philosophical criticisms

THANK YOU

Any Question ?