Knowledge Transfer Costs and the Costs of Inconsistent Objectives as Determinants of Financial Reporting in the Public Sector

Posted: 11 Nov 1997

See all articles by David Hay

David Hay

University of Auckland - Business School

Date Written: July 1997

Abstract

Jensen and Meckling (1992, 1995) suggest that decentralisation by a firm is determined by knowledge transfer costs and control costs, including the costs of inconsistent objectives. This idea is applicable to the public sector as well as to the private sector. Christie, et al. (1993) find evidence (in the private sector) consistent with these predictions. I hypothesise that the use of audited financial statements and reports on service performance in the New Zealand public sector is a consequence of decentralisation, and will be associated with the presence of high knowledge transfer costs, and low costs of inconsistent objectives. The evidence is consistent with my predictions, and is robust to alternative ways of measuring variables.

JEL Classification: M41, M46, H11, L23

Suggested Citation

Hay, David, Knowledge Transfer Costs and the Costs of Inconsistent Objectives as Determinants of Financial Reporting in the Public Sector (July 1997). Available at SSRN: https://ssrn.com/abstract=41120

David Hay (Contact Author)

University of Auckland - Business School ( email )

12 Grafton Rd
Auckland, 1010
New Zealand

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