“Synergy” implies that the value of activities undertaken jointly is greater than the sum of the values of the individual activities. Reasons cited for synergy include economies of scale, benefits due to vertical integration, and efficiency gains from shared inputs and skills. This paper shows that incentive (control) reasons alone can make activities synergistic. The result is derived in a model of adverse selection with risk‐neutral participants and linear technology. The linearity in the setting removes any obvious benefits to undertaking activities in tandem. Synergy gains are attributed to a convexity in the principal's payoff introduced by the activities' impact on the production versus rents trade‐off.

The centrality of private information in the design of accounting institutions has been explored via agency models that address control concerns as well as disclosure models that amplify valuation issues. This paper derives disclosures by an entrepreneur‐owner when both control and valuation concerns are in play. In particular, the disclosures influence stock price not only via a direct impact on valuation of the firm's revenue but also via an indirect impact on the firm's cost of procuring inputs from a self‐interested and privately informed upstream supplier. In this setting, disclosures are judiciously designed to influence the supplier's decision to share cost information and to control information rents embedded in the procurement contract within the supply chain. Specifically, in order to convey that information rents are not in the offing and, thus, motivate information sharing by the supplier, the owner has incentives to convey a less “rosy” picture. In effect, when controlling supplier actions also becomes important, the owner discloses some unfavorable revenue news that she would have otherwise withheld and conceals some favorable revenue news that she would have otherwise revealed. Consequently, in our model, the disclosure region is either two‐tailed or intermediate, in contrast to the single‐tailed disclosure region implied by familiar valuation considerations alone.

Financial statements summarize a firm's fiscal position using only a limited number of accounts. Readers often interpret financial statements in conjunction with other information, some of which may be aggregated in a different way (or not at all). This paper exploits properties of the double‐entry accounting system to provide a systematic approach to reconciling diverse financial data. The key is the ability to represent the double‐entry system by network flows and, thereby, access well‐recognized network optimization techniques. Two specific uses are investigated: the reconciliation of audit evidence with management‐prepared financial statements, and the creation of transaction‐level financial ratios.

Firms’ reluctance at times to publicly disclose financial information is often attributed to concern that the information may be used against them by self‐interested outside parties. These outside parties may interact with the firm in the horizontal realm (e.g., retail competitors) or in the vertical arena (e.g., wholesale suppliers). This article is built on the premise that fully understanding the strategic consequences of disclosure requires joint consideration of horizontal and vertical relationships. When both rivals and suppliers are accounted for, we demonstrate that (i) lower intra‐industry correlation in product demand favors disclosure, with the precise correlation‐cutoff dependent on the firm's use of input suppliers; and (ii) the more a firm relies on input suppliers with pricing power, the less attractive is disclosure.

In this paper, we embed the double entry accounting structure in a simple belief revision (estimation) problem. We ask the following question: Presented with a set of financial statements (and priors), what is the reader's “best guess” of the underlying transactions that generated these statements? Two properties of accounting information facilitate a particularly simple closed form solution to this estimation problem. First, accounting information is the outcome of a linear aggregation process. Second, the aggregation rule is double entry.