A Real Effects Perspective to Accounting Measurement and Disclosure: Implications and Insights for Future Research

79 Pages Posted: 24 Jan 2016

See all articles by Chandra Kanodia

Chandra Kanodia

University of Minnesota - Carlson School of Management

Haresh Sapra

Booth School of Business, University of Chicago

Multiple version iconThere are 2 versions of this paper

Date Written: January 2016

Abstract

Accounting measurement and disclosure rules have a significant impact on the real decisions that firms make. In this essay, we provide an analytical framework to illustrate how such real effects arise. Using this framework, we examine three specific measurement issues that remain controversial: (1) How does the measurement of investments affect a firm’s investment efficiency? (2) How does the measurement and disclosure of a firm’s derivative transactions affect a firm’s choice of intrinsic risk exposures, risk management strategy, and the incentive to speculate? (3) How marking-to-market the asset portfolios of financial institutions could generate pro-cyclical real effects? We draw upon these real effects studies to generate sharper and novel insights that we believe are useful not only for the development of accounting standards but also for guiding future empirical research.

Keywords: Real Effects, Disclosure, Accounting Measurement, Accounting Standards, Transparency, Price Efficiency, Economic Efficiency

JEL Classification: D82, D84, G14, G18, G30, M41, M42

Suggested Citation

Kanodia, Chandra and Sapra, Haresh, A Real Effects Perspective to Accounting Measurement and Disclosure: Implications and Insights for Future Research (January 2016). Journal of Accounting Research, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2721084

Chandra Kanodia

University of Minnesota - Carlson School of Management ( email )

321 19th Avenue South
674 Management and Economics
Minneapolis, MN 55455
United States
612-624-6880 (Phone)
612-626-7795 (Fax)

Haresh Sapra (Contact Author)

Booth School of Business, University of Chicago ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

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