财务会计理论(司可脱)ppt文件09_scott_im_ch09

2006 Pearson Education Canada Inc.,9-1,Conflict Resolution,Game TheoryAgency Theory, 2006 Pearson Education Canada Inc.,9-2,Agency Theory,A principal wants to hire an agent for some specialized taskSeparation of ownership and controlPrincipal and agent are rational. Agent is risk-averse. Principal may be risk-averse, but assume risk-neutral for simplicityPrincipal wants agent to work hard, butAgent is effort-averse, 2006 Pearson Education Canada Inc.,9-3,Moral Hazard Problem of Information Asymmetry,Principal cannot observe manager effort - call it aCall managers disutility of effort V(a)More effort- greater disutilityImplies manager may shirk on effortE.g., if paid a fixed salary, how hard will the manager work?, 2006 Pearson Education Canada Inc.,9-4,Agency Contract Example 9.3,Owner: rational, risk-neutralWants to max. expected firm payoff xManager: rational, risk-averse and effort-averseWants to max. expected utility of compensation c, net of disutility of effort V(a)To overcome shirking, why not give manager a share of payoff?, 2006 Pearson Education Canada Inc.,9-5,Agency Contract Example 9.3,A problem arises:Firm payoff not known until after contract expires (single period contract). Why?Manager has to be paid at contract expiryA solution:Base manager compensation on a performance measure (e.g., net income), which is available at period end, 2006 Pearson Education Canada Inc.,9-6,Timeline for Agency Example, 2006 Pearson Education Canada Inc.,9-7,Motivation of Manager Effort,To motivate manager effort, give manager a share of firm net incomeConcept of reservation utility, call it RIf manager is to work for owner, must receive expected utility of at least R, 2006 Pearson Education Canada Inc.,9-8,Assumptions for Agency Contract Example 9.3,Manager has 2 effort choices:Work hard (a1 )Shirk (a2 )If manager works hard, payoff isx = 100 with prob. 0.6x = 50 with prob. 0.4If manager shirks, payoff isx = 100 with prob. 0.4x = 50 with prob. 0.6, 2006 Pearson Education Canada Inc.,9-9,Assumptions, contd.,Managers contract (linear): c = ky, 0 k 1, where y is net incomeManagers reservation utility: R = 3Quality of net income y (noisy, but unbiased, e.g., fair value accounting)If x is going to be 100y = $125 with prob. 0.5y = $75 with prob. 0.5If x is going to be 50y = $62.50 with prob. 0.5y = $37.50 with prob. 0.5, 2006 Pearson Education Canada Inc.,9-10,Assumptions, contd.,Managers utilityEUm(a1) = 0.60.5(k 125)1/2 + 0.5(k 75)1/2+ 0.40.5(k 62.50)1/2 + 0.5(k 37.50)1/2 - 2EUm(a2) = 0.40.5(k 125)1/2 + 0.5(k 75)1/2 + 0.60.5(k 62.50)1/2 + 0.5(k 37.50)1/2 1.7Owners utility (risk neutral)EUO(a1) = 0.60.5(1 k) 125) + 0.5(1 k) 75)+ 0.40.5(1 k) 62.50) + 0.5(1 k) 37.50), 2006 Pearson Education Canada Inc.,9-11,Formal Statement of the Owners Problem,Find k to maximize EUO(a)Subject to:Manager wants to take a1 (incentive compatibility)manager receives reservation utility of R = 3The result:K = .326, 2006 Pearson Education Canada Inc.,9-12,Check,Managers utilityEUm(a1) = 0.60.5(.326 125)1/2 + 0.5(.326 75)1/2+ 0.40.5(.326 62.50)1/2 + 0.5(.326 37.50)1/2 2 = 3EUm(a2) = 0.40.5(.326 125)1/2 + 0.5(.326 75)1/2+ 0.60.5(.326 62.50)1/2 + 0.5(.326 37.50)1/2 1.7 = 2.96Manager will work hard, (i. e., incentive compatible), 2006 Pearson Education Canada Inc.,9-13,Check, contd,Owners utilityEUO(a1) = 0.6100 0.5(.326 125) + 0.5(.326 75)+ 0.450 0.5(.326 62.50) + 0.5(.326 37.50) = 53.92, 2006 Pearson Education Canada Inc.,9-14,A More Efficient Contract, Example 9.4,Retain previous assumptions, exceptQuality of net income y (less noisy, still unbiased)If x is going to be 100y = $110 with prob. 0.5y = $90 with prob. 0.5If x is going to be 50y = $55 with prob. 0.5y = $45 with prob. 0.5, 2006 Pearson Education Canada Inc.,9-15,A More Efficient Contract, contd.,Thenk = .322 (compared with .326 in previous contract)EUm(a1) = 0.60.5(.322 110)1/2 + 0.5(.322 90)1/2 + 0.40.5(.322 55)1/2 + 0.5(.322 45)1/2 2 = 3EUm(a2) 3 can be verifiedEUO(a1) = 0.6100 0.5(.322 125) + 0.5(.322 75)+ 0.450 0.5(.322 62.50) + 0.5(.322 37.50) = 54.24 Owners utility greater than previous contract, 2006 Pearson Education Canada Inc.,9-16,Implications of Agency Theory For Financial Accounting,Net income mattersThe agency relationship is a contract. Contracts are rigidImplies accounting policy choice and changes to accounting policy matterManager will usually object to new accounting standards that:Lower reported net income (why?)Increase its volatility (why?), 2006 Pearson Education Canada Inc.,9-17,Implications, Contd.,Net income must be jointly observable (i.e., by manager and owner)Role for GAAP, audit, 2006 Pearson Education Canada Inc.,9-18,Implications, Contd.,Holmstrms agency modelBasing managers compensation on 2 variables is better than on 1 variable, unless the 2 variables are perfectly correlatedThis implies that net income is in competition with share price performance for “market share” in compensation contracts, 2006 Pearson Education Canada Inc.,9-19,Implications, Concl.,To maintain market share, net income should be highly informative about manager effortProperties net income needs to be highly informativeSensitivityNet income responds to changes in manager effortPrecisionNet income has low noise re effort, 2006 Pearson Education Canada Inc.,9-20,Implications, Concl.,Unfortunately, sensitivity and precision must be traded offHistorical cost accountingLow sensitivity due to recognition lagHigh precision since relatively unaffected by market-wide factorsFair value accountingHigh sensitivity due less recognition lagLow precision since affected by market-wide factorsFundamental problem of financial account