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Accounting Numbers and Management’s Financial Reporting Incentives: Evidence from Positive Accounting Theory

Author

Listed:
  • Alayemi, Sunday Adebayo

    (School of Business and Management Studies, Department of Accountancy, The Federal Polytechnic, Offa, Nigeria)

  • Morohunfola Olasunkanmi Abdul-Lateef

    (School of Business and Management Studies, Department of Accountancy, The Federal Polytechnic, Offa, Nigeria)

Abstract

Accounting information plays a significant role in market-based economies because it is pivotal used by those who provide capital to help in making an informed economic decision. The public accepts the accounting information as the gospel truth without considering the politics underneath in the preparation and presentation of the financial statement. Unsuspected investors rely on the accounting numbers as presented in the published/final account of an entity via financial reporting. The positive accounting theory hypotheses postulated that in the choice of accounting policies underlying the preparation of financial statement there are certain factors like bonus plan, debt covenant and political hypotheses that are put into consideration. Â Investors to rely on the accounting information must critically examine and understand the reason behind the accounting figures as presented in the financial statement by the directors who are the agents of the entity to be able to make an economic decision as to whether it is proper to invest in such an entity.

Suggested Citation

  • Alayemi, Sunday Adebayo & Morohunfola Olasunkanmi Abdul-Lateef, 2017. "Accounting Numbers and Management’s Financial Reporting Incentives: Evidence from Positive Accounting Theory," Noble International Journal of Economics and Financial Research, Noble Academic Publsiher, vol. 2(2), pages 50-53, February.
  • Handle: RePEc:nap:nijefr:2017:p:50-53
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    References listed on IDEAS

    as
    1. Ahmed, Anwer S. & Duellman, Scott, 2007. "Accounting conservatism and board of director characteristics: An empirical analysis," Journal of Accounting and Economics, Elsevier, vol. 43(2-3), pages 411-437, July.
    2. Holthausen, Robert W. & Leftwich, Richard W., 1983. "The economic consequences of accounting choice implications of costly contracting and monitoring," Journal of Accounting and Economics, Elsevier, vol. 5(1), pages 77-117, April.
    3. Naomi Soderstrom & Kevin Jialin Sun, 2007. "IFRS Adoption and Accounting Quality: A Review," European Accounting Review, Taylor & Francis Journals, vol. 16(4), pages 675-702.
    4. Hagerman, Robert L. & Zmijewski, Mark E., 1979. "Some economic determinants of accounting policy choice," Journal of Accounting and Economics, Elsevier, vol. 1(2), pages 141-161, August.
    5. Benston, George J., 2006. "Fair-value accounting: A cautionary tale from Enron," Journal of Accounting and Public Policy, Elsevier, vol. 25(4), pages 465-484.
    6. Patten, Dennis M., 1991. "Exposure, legitimacy, and social disclosure," Journal of Accounting and Public Policy, Elsevier, vol. 10(4), pages 297-308.
    7. Ross L. Watts, 1977. "Corporate Financial Statements, A Product of the Market and Political Processes," Australian Journal of Management, Australian School of Business, vol. 2(1), pages 53-75, April.
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