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The effect of alternative accounting measurement bases on investors’ assessments of managers’ stewardship

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  • Anderson, Spencer B.
  • Brown, Jason L.
  • Hodder, Leslie
  • Hopkins, Patrick E.

Abstract

We conduct a laboratory experiment to examine investors’ assessments of managers’ stewardship. We provide evidence that investors tend to attribute external (i.e., non-manager-related) causes of firm performance to managers’ performance. We predict and find that fair value information enables investors to overcome this tendency and make better stewardship decisions than investors with amortized cost information. We also find that investors presented with amortized-cost-based financial statements perform better to the extent they access fair-value-based footnote information, while investors presented with fair-value-based financial statements perform worse to the extent they access amortized-cost-based footnote information. Collectively, our results suggest that investors’ stewardship decisions are improved because fair value information more transparently provides the information required to properly consider the opportunity costs associated with managers’ actions and disentangle endogenous actions by managers from exogenous market forces that are outside of managers’ control.

Suggested Citation

  • Anderson, Spencer B. & Brown, Jason L. & Hodder, Leslie & Hopkins, Patrick E., 2015. "The effect of alternative accounting measurement bases on investors’ assessments of managers’ stewardship," Accounting, Organizations and Society, Elsevier, vol. 46(C), pages 100-114.
    • Handle: RePEc:eee:aosoci:v:46:y:2015:i:c:p:100-114
    DOI: 10.1016/j.aos.2015.03.007
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    References listed on IDEAS

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    Cited by:

    1. Pantic, B., 2016. "Comparability of financial reports: A literature review of most recent studies," Working Papers 6451, Graduate School of Management, St. Petersburg State University.
    2. Platt, William, 2015. "A practitioners perspective: 2014 AOS Conference on Accounting Estimates," Accounting, Organizations and Society, Elsevier, vol. 46(C), pages 5-7.
    3. Koonce, Lisa & Mongold, Cassie & Quaid, Laura & White, Brian J., 2024. "Experimental research on standard-setting issues in financial reporting," Accounting, Organizations and Society, Elsevier, vol. 112(C).
    4. Cascino, Stefano & Clatworthy, Mark A. & Osma, Beatriz Garcia & Gassen, Joachim & Imam, Shahed, 2021. "The usefulness of financial accounting information: evidence from the field," LSE Research Online Documents on Economics 107569, London School of Economics and Political Science, LSE Library.
    5. Emett, Scott A. & Nelson, Mark W., 2015. "Discussion of “The effect of alternative accounting measurement bases on investors’ assessments of managers’ stewardship”," Accounting, Organizations and Society, Elsevier, vol. 46(C), pages 115-118.

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