Note on Financial Reporting Strategy and Analysis When Managers Have Proprietary Information Harvard Case Solution & Analysis

Provides a framework that helps explain these real comments on the accounting and financial statement analysis. When managers have superior information about the firm's strategy, and when investors suspect that managers have incentives not to fully disclose this information, financial statements, management is becoming an important issue. Superior information management is the source of value and distortion in the accounting records. Accounting conventions and standards evolve over time to limit the ability of managers to the distortion of financial data, but they leave considerable room for managers reflect their superior knowledge of the business. The net result of these forces is that accrual accounting data are biased and noisy, and investors can evaluate the performance of firms only inaccurate. Managers can improve the "assessment of the firms investors productivity through effective strategies for disclosure. Financial analysts are trying to create inside information from publicly available data and, therefore, play an important role in the communication between managers and investors." Hide
by Krishna G. Palepu 8 pages. Publication Date: May 10, 1990. Prod. #: 190188-PDF-ENG

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