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Responsibility Accounting with a Privately Informed Agent

Author

Listed:
  • François Larmande

    (EM - EMLyon Business School)

  • Jean-Pierre Ponssard

    (CECO - Laboratoire d'économétrie de l'École polytechnique - X - École polytechnique - CNRS - Centre National de la Recherche Scientifique)

Abstract

The application of the controllability principle to eliminate external factors remains problematicinpractice. A key is sue concerns the fact that the manager may get some private pre-decision signal about this external environment and may use this information to mitigate or amplify its impact. The question is analyzed in a multi task agency model in which the agent has a limited liability, thus earns rents and is not indiferent to the task performed. Under certain conditions, it is proved that the optimal contractonlyse lective lye liminates the impact of the environment. It does neutralize it if the agent reports a signal of low impact of the environment but does not filter it out if the agent reports a signal of high impact.

Suggested Citation

  • François Larmande & Jean-Pierre Ponssard, 2007. "Responsibility Accounting with a Privately Informed Agent," Working Papers hal-00243068, HAL.
    • Handle: RePEc:hal:wpaper:hal-00243068
    Note: View the original document on HAL open archive server: https://hal.science/hal-00243068
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    Cited by:

    1. Philip Owino & John C. Munene & Joseph M. Ntayi, 2016. "Does responsibility accounting in public universities matter?," Cogent Business & Management, Taylor & Francis Journals, vol. 3(1), pages 1254838-125, December.
    2. François Larmande & Jean-Pierre Ponssard, 2007. "The lack of controllability of EVA explains its decline a field study," Working Papers hal-00243065, HAL.

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