Research in accounting addresses the construction and use of the financial information of an organization. This relates to parties both within and outside the organization. Management accounting is concerned with the internal stakeholders, whereas financial accounting focuses on the external stakeholders. From a decision relevant perspective the question is how the economics of the production is reflected in the product cost or how the accounting value of the firm is useful for investment decisions in the financial markets. From a performance evaluation perspective the question is how the accounting system has to be designed to motivate goal congruent behavior when the decision authority is delegated to a manager. From a regulatory perspective the question is how to set standards to control the delegation of the construction of the accounting systems to individual firms.
The accounting system reflects the financial information, and the information is often proprietary. The firm or manager supplies the information for two purposes. On the one hand, it is used for decision-making. On the other hand, it is used to evaluate the performance of the manager. In order to control the information exchange between the firm and the financial markets the financial statements are audited. This reporting dilemma represents the core of accounting and is central to the research of the group.
The focus of the accounting group’s research activities is on analyzing accounting as an information system using information economics. All aspects of accounting are included in the research of the group: managerial accounting, financial accounting, and auditing. The group is engaged in development of accounting theory, how accounting influences the supply chain efficiency, how the firms’ financial reporting is affected by competitive strategy or institutional environment, and audit market competition and policy implications.
Accounting reflects the economics of the firm and is used for decision making with the aim of maximizing profit. Hence, it is natural to use economics as the platform for accounting research either to do analytical research or to do empirical research. In particular, information economics forms a useful basis for accounting research, as accounting is only of value when there is a friction in the market. At the abstract level, accounting is fundamental to the optimal design of the decision mechanisms, as accounting provides the financial information about the organization.
Within the firm the accounting system is used to enhance the performance of the organization, as it helps align incentives and provide information for decision-making. In supply chains among independent firms the accounting system forms the basis for contractual arrangements among the participating firms. Financial accounting provides information to capital markets about the firm’s current performance and future economic potential. The research group uses formal economic modeling as well as empirical (including namely archival and experimental) methods. Analyses and conclusions in studies using formal economic modeling are based on the act of formally modeling theories or substantiating ideas in mathematical terms. In contrast, archival studies are based on objective data collected from repositories, while experimental studies rely on data the researcher gathered by administering treatments to participants.
See also: Publications