Abstract. In this paper we outline three ways that experimental methods can add value to academic accounting research, practice, and particularly standard setters such as the Accounting Standards Board (AcSB), the Financial Accounting Standards Board (FASB), and the International Accounting Standards Committee (IASC). Through examples, we illustrate that, compared to archival methods, experimental methods can have three advantages in supplying evidence on questions that are important and relevant to financial accounting prescriptions. These advantages are timeliness, inclusiveness, and causality. First, experimental methods can be more timely in that experiments can be designed to provide evidence on an ex ante basis. This advantage particularly applies when there are no relevant archival data available and/or no close historical substitutes for a proposed accounting standard. Second, experiments can be more inclusive. They can test a spectrum of standard‐setting solutions that the archival approach precludes for lack of available data. Finally, experimental methods can powerfully isolate and measure the direction and strength of cause‐effect relations. In their decision making, standard setters require knowledge on the nature and cause of intended and unintended consequences of proposed and already promulgated standards. Therefore, cause‐effect evidence is a critical and valuable input to their deliberations. Résumé. Les auteurs décrivent trois façons d'augmenter, grâce aux méthodes expérimentales, la qualité de la recherche universitaire en comptabilité, de l'exercice de la profession comptable et, en particulier, du travail de normalisation comptable auquel se livrent des organismes comme l'Accounting Standards Board (AcSB), le Financial Accounting Standards Board (FASB) et l'International Accounting Standards Committee (IASC). Par des exemples, les auteurs illustrent le fait que les méthodes expérimentales peuvent présenter trois avantages, par rapport aux méthodes d'archivage, dans la documentation des questions d'importance pertinentes aux normes de comptabilité financière: la rapidité, l'intégralité et la causalité. En effet, les méthodes expérimentales peuvent être, en premier lieu, plus rapides, du fait qu'il est possible de concevoir les expériences de manière à obtenir des preuves documentaires sur une base ex ante. Cet avantage se concrétise particulièrement lorsqu'il n'existe pas de données d'archives pertinentes disponibles et (ou) aucun proche substitut de données historiques relativement à une norme comptable proposée. En deuxième lieu, les méthodes expérimentales peuvent être plus englobantes. Elles permettent parfois de vérifier un éventail de solutions, en ce qui a trait aux normes, que la méthode des données d'archives ne permet pas de vérifier en raison de l'insuffisance des données disponibles. En dernier lieu, les méthodes expérimentales permettent d'isoler et de mesurer clairement l'orientation et l'intensité des relations de cause à effet. Dans leurs décisions, les responsables de la normalisation doivent disposer de renseignements sur la nature et la cause des conséquences prévues et imprévues des normes proposées et déjà promulguées. C'est pourquoi la documentation relative à la causalité est d'un apport déterminant et précieux dans leurs délibérations.

This paper shows through increasing disclosure requirements may induce firms to reduce their value-relevant disclosures. In the absence of segment reporting requirements, an incumbent firm may voluntarily disclose value-relevant information because it can use other, value-irrelevant, information to jam proprietary disclosures. However, when required to disclose segment data, the incumbent may aggregate proprietary information with other value-relevant information to deter entry by a rival. Hence, the firm does not disclose value-relevant information it would have revealed voluntarily in the absence of segment disclosure requirements. In such situations, requiring more disaggregate disclosures can actually decrease price efficiency.

Information content, Cash flows from operations, Earnings permanence, Transitory earnings

[This study empirically tests the prediction that the inclusion of larger proportions of outside members on the board of directors significantly reduces the likelihood of financial statement fraud. Results from logit regression analysis of 75 fraud and 75 no-fraud firms indicate that no-fraud firms have boards with significantly higher percentages of outside members than fraud firms; however, the presence of an audit committee does not significantly affect the likelihood of financial statement fraud. Additionally, as outside director ownership in the firm and outside director tenure on the board increase, and as the number of outside directorships in other firms held by outside directors decreases, the likelihood of financial statement fraud decreases.]

Financial reporting, Moral Hazard, Contracting, Accrual accounting

Abstract. This study extends the Beck, Davis, and Jung (1992) experimental study by incorporating opportunities for taxpayer subjects to purchase advice before making their tax reporting decisions. Tax advice has two roles in the model and experiment. First, tax advice allows taxpayers to reduce their uncertainty about the amount of taxes owed. This permits us to study the demand for tax advice in conjunction with its effect on tax reporting decisions. Second, the decision to purchase tax advice from an expert provides a means of signaling that may alter tax agency audit policies. The resulting audit policies, in turn, can affect taxpayers' decisions to purchase tax advice. These interdependencies are incorporated in a game‐theoretic model and several predictions are tested experimentally. Consistent with theory, subjects sorted themselves into three groups based upon their private information. Another prediction supported by the experiment is that the demand for tax advice increased with the magnitude of an uncertain tax deduction (amount‐at‐risk). We also found, as expected, that the effects of tax advice on pre‐audit tax revenues depend upon the amount‐at‐risk. When the amount‐at‐risk was high, subjects in settings with tax advice reported lower average incomes and paid lower taxes than did those subjects in settings without the opportunity to purchase tax advice. The opposite was true for the low amount‐at‐risk condition, supporting our prediction that tax advice and amount‐at‐risk would have an interactive effect on tax reporting. Analysis was also performed on post‐audit tax collections. Contrary to theory, post‐audit tax payments were found to increase when subjects had an opportunity to purchase tax advice. This result apparently was caused by a tendency to over‐purchase tax advice and, in some cases, to report a low income regardless of the advice received. Résumé. Les auteurs développent l'étude expérimentale de Beck, Davis et Jung (1992) en y incorporant la possibilité pour les sujets contribuables de solliciter des conseils avant de prendre leurs décisions relatives à l'information qu'ils fourniront aux fins fiscales. Les conseils fiscaux jouent deux rôles dans le modèle et l'expérience. Premièrement, ils permettent aux contribuables de réduire leur incertitude relative au montant des impôts auxquels ils sont assujettis. Les auteurs peuvent ainsi étudier la demande de conseils fiscaux en conjonction avec leurs conséquences sur les décisions relatives à l'information à fournir aux fins fiscales. Deuxièmement, la décision de solliciter les conseils fiscaux d'un expert est un signal pouvant influer sur les politiques de vérification des représentants du fisc. À leur tour, ces politiques peuvent influer sur les décisions des contribuables de solliciter des conseils fiscaux. Ces interdépendances ont été intégrées à un modèle de jeu théorique et les auteurs ont vérifié plusieurs prédictions par expérimentation. Conformément à la théorie, les sujets se sont répartis en trois groupes, en fonction de l'information privilégiée dont ils disposaient. L'expérimentation a confirmé une autre prédiction: la demande de conseils fiscaux augmente avec l'importance de la somme dont la déductibilité est incertaine (montant à risque). Les auteurs constatent également, comme ils s'y attendaient, que les effets des conseils fiscaux sur les recettes fiscales antérieures à la vérification dépendent du montant à risque. Lorsque le montant à risque est élevé, les sujets pouvant solliciter des conseils fiscaux font état de revenus moyens inférieurs et paient moins d'impôt que les sujets n'ayant pas la possibilité de solliciter des conseils fiscaux. L'inverse est vrai lorsque le montant à risque est faible, ce qui confirme la prédiction selon laquelle les conseils fiscaux et le montant à risque ont un effet interactif sur l'information fournie aux fins fiscales. Les auteurs analysent également les impôts perçus postérieurement à la vérification. Contrairement à la théorie, ils constatent que les paiements fiscaux postérieurs à la vérification augmentent lorsque les sujets ont eu la possibilité de solliciter des conseils fiscaux. Ce résultat semble être attribuable à une tendance à solliciter des conseils fiscaux avec excès et, dans certains cas, à faire état d'un faible revenu, malgré les conseils reçus.

As traders learn about the true distribution of some asset's dividends, a speculative premium occurs as each trader anticipates the possibility of reselling the asset to another trader before complete learning has occurred. Small differences in prior beliefs lead to large speculative premiums during the learning process. This phenomenon helps explain a paradox concerning the pricing of initial public offerings. The result casts light on the significance of the common prior assumption in economic models.

This paper investigates the relative importance of cyclical fluctuations in labor and capital utilization, increasing returns to scale, and technology shocks as explanations for procyclical productivity. It exploits the intuition that materials inputs do not have variable utilization rates, and materials are likely to be used in fixed proportions with value added. Therefore, materials growth is a good measure of unobserved changes in capital and labor utilization. Using this measure shows that cyclical factor utilization is very important, returns to scale are about constant, and technology shocks are small and have low correlation with either output or hours growth.

This paper examines strategic trade policy under asymmetric information with publicly observable contracts. We analyse both the cases of unilateral and bilateral intervention. We find that the requirement of incentive compatibility undermines the strategic precommitment effect when public funds are costly, even with no restrictions on the form of the policies. Second, when firms sell substitute goods, the introduction of a rival interventionist government may reduce the cost of informational rents to each government. Third, it turns out that under bilateral intervention there exists a continuum of symmetric equilibria with levels of output and corresponding levels of welfare in the exporting countries which can be ranked. The requirement of ex post participation constraints for the firm limits the set of subsidies which can be offered to the firm. In particular, under bilateral intervention, the equilibrium levels of output which are implemented under adverse selection are below their values under ex ante uncertainty, i.e., below the equilibrium levels of output which are achieved when firms sign their contracts before the realization of their costs.