nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2007‒09‒02
two papers chosen by
Alexander Harin
Modern University for the Humanities

  1. Honesty Is the Best Policy?When There Is Money in It: Can Firms Promote Honest Reporting Behavior by Managers? By Jia, Y.
  2. Fundamentals of the functional theory of company valuation By Matschke, Manfred Jürgen; Brösel, Gerrit

  1. By: Jia, Y. (Tilburg University, Center for Economic Research)
    Abstract: This paper provides experimental evidence on how incentive compensation, peer-group behavior, and audit (team) effectiveness influence managerial reporting behavior. Results show that an increase in incentive compensation intensity induces subjects to report less truthfully. High level of peer honesty promotes truthful reporting; however, the effects are weaker when incentive compensation intensity is high. Audit (team) effectiveness shows no significant influence on reporting behavior. The results provide the first clear evidence that firms need to consider carefully the effect of incentive compensation as well as the influence of peer groups when designing contracts. Furthermore, without a credible penalty for untruthful financial report, increased audit (team) effectiveness will not promote honest reporting.
    Keywords: Managerial honesty; Incentive compensation intensity; Peer behavior; Audit effectiveness
    JEL: G30 J33 M41
    Date: 2007
  2. By: Matschke, Manfred Jürgen; Brösel, Gerrit
    Abstract: After a brief overview of different company valuation theories, this paper presents the main functions (decision, arbitration, and argument or negotiation function) of company valuation according to the functional (i.e. purpose-oriented) theory. The main body of the paper focusses on the decision function and shows how the decision value can be derived as a subjective limit value that different economic agents assign to the company. Finally, the differences between the functional and the market value oriented theory of company valuation are discussed.
    Keywords: Unternehmensbewertung; company valuation; decision function; subjective limit value; оценкa предприятий
    JEL: M20 G11 M40 G34 G31
    Date: 2007

This nep-acc issue is ©2007 by Alexander Harin. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.