A contracting perspective on earnings quality

• 成果类型: Article
• 署名作者: Christensen, PO; Feltham, GA; Sabac, F
• 署名单位: University of Southern Denmark; University of British Columbia; University of Alberta
• 刊物名称: JOURNAL OF ACCOUNTING & ECONOMICS
• ISSN/ISSBN: 0165-4101
• DOI: 10.1016/j.jacceco.2004.06.002
• 发表日期: 2005
• 关键词: residual income valuation; short-term contracts; moral hazard; Cash flows; executive-compensation; ACCOUNTING EARNINGS; Dynamic incentives; FIRM-PERFORMANCE; agency contracts; ceo turnover

摘要

This paper analyzes the impact of signal-to-noise-ratios and the autocorrelation of a performance measure on the principal's welfare in dynamic agencies with renegotiation. We consider the impact of changes in the persistent, transitory, and reversible components of accounting earnings on its usefulness in valuation versus contracting. Increasing the persistent components and reducing the reversible components are generally desirable for valuation, but not for contracting. Eliminating transitory components of earnings is generally desirable for valuation, but not necessarily for contracting. We discuss the contracting implications of differences in the autocorrelations of accounting earnings versus stock returns. (c) 2005 Elsevier B.V. All rights reserved.