Experimental Research in Financial Accounting

72 Pages Posted: 28 Feb 2001

See all articles by Robert Libby

Robert Libby

Cornell University - Samuel Curtis Johnson Graduate School of Management

Robert J. Bloomfield

Cornell University - Samuel Curtis Johnson Graduate School of Management

Mark W. Nelson

Cornell University - Samuel Curtis Johnson Graduate School of Management

Date Written: February 23, 2001

Abstract

This paper uses recent experimental studies of financial accounting to illustrate our view of how such experiments can be conducted successfully. Rather than provide an exhaustive review of the literature, we focus on how particular examples illustrate successful use of experiments to determine how, when and (ultimately) why important features of financial accounting settings influence behavior. We first describe how changes in views of market efficiency, reliance on the experimentalist?s comparative advantage, new theories, and a focus on key institutional features have allowed researchers to overcome the criticisms of earlier financial accounting experiments. We then describe how specific streams of experimental financial accounting research have addressed questions about financial communication between managers, auditors, information intermediaries, and investors, and indicate how future research can extend those streams. We focus particularly on (1) how managers and auditors report information, (2) how users of financial information interpret those reports, (3) how individual decisions affect market behavior, and (4) how strategic interactions between information reporters and users can affect market outcomes. Our examples include and integrate experiments that fall into both the "behavioral" and "experimental economics" literatures in accounting. Finally, we discuss how experiments can be designed to be both effective and efficient.

JEL Classification: M40, M49, G12, G14, C91, C92

Suggested Citation

Libby, Robert and Bloomfield, Robert J. and Nelson, Mark W., Experimental Research in Financial Accounting (February 23, 2001). Available at SSRN: https://ssrn.com/abstract=261860 or http://dx.doi.org/10.2139/ssrn.261860

Robert Libby (Contact Author)

Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )

Ithaca, NY 14853
United States
607-255-3348 (Phone)
607-254-4590 (Fax)

Robert J. Bloomfield

Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )

450 Sage Hall
Ithaca, NY 14853
United States
607-255-9407 (Phone)
607-254-4590 (Fax)

Mark W. Nelson

Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )

448 Sage Hall
Ithaca, NY 14853
United States
607-255-6323 (Phone)
607-254-4590 (Fax)

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