Advance accounting principle and practice

Advance accounting principle and practice. Advance accounting principle and practice. Assignment Task:

American economists Michael Jensen and Kevin Murphy (1990) argued that the interests of CEOs needed to be aligned with the interests of shareholders, and remuneration of stock is the best way to achieve this.


You are required to:

  1. Describe and analyse above statement using any of the accounting theories discussed in Topic 1.


  1. Discuss the implication of the above statement in relation to Research and Development expenses.


Your arguments for requirement above have to be supported by relevant academic refereed articles (at least 6). You should provide evidence that you have carefully examined the literature, understand it, and have been able to summarise its essential content by integrating these articles into your own arguments and perspective.




  1. The interests of both the need to combine together– PAT theory – (ex ante & ex post – 3 hypothesis) Agency theory
  2. how to combine the interests together?is it stock is the only way ?


If managers is rewarded for their performances, such as: in stock exchange rates and/or accounting profits, they will attempt to increase the stock exchange rates and/or accounting profits to maximize their wealth (Deegan and Unerman, 2005) by disclosing their CSR activities in annual reports.

    1. Fixed basis (independent of performance);
    2. On the basis of results achieved;
    3. In a combination of 1 and 2

Alternatively,       managers            could     be           rewarded            in            terms of market-based schemes such as:

–Basing a cash bonus on any increases in share prices

–Providing managers with shares or option to shares in the firm

If the value of the firm’s shares increases, both managers and owners will benefit and, importantly, managers will be given an incentive to increase the value of the firms



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Advance accounting principle and practice

Advance accounting principle and practice

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