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    A Framework for Research on Corporate Accountability...
    research summary posted September 16, 2015 by Jennifer M Mueller-Phillips, tagged 14.0 Corporate Matters 
    A Framework for Research on Corporate Accountability Reporting.
    Practical Implications:

    The author shows how the successive incidence of these properties in observed corporate accountability reports can be used to determine whether and how those reports create or destroy value for shareholders and other constituencies. He shows how the hypotheses developed in the skeptical appraisal of corporate accountability reporting section can be used to distinguish across these explanations in observed corporate accountability reports.


    Ramanna, K. 2013. A Framework for Research on Corporate Accountability Reporting. Accounting Horizons 27 (2): 409-432.

    corporate accountability reporting, social responsibility in business, financial statements
    Purpose of the Study:

    This paper provides an accounting-based conceptual framing of the phenomenon of corporate accountability reporting. In the paper, the author leverages the positive accounting literature’s current understanding of the role of financial reporting in a market economy and its understanding of the properties of financial reports, to develop some basic hypotheses on corporate accountability reporting. Further refinement and tests of these hypotheses are likely to help us better understand some of the fundamental questions in corporate accountability reporting outlined in the Harvard Business School (HBS) conference’s call for papers. 

    Corporate accountability reporting is defined to be broader than corporate accounting in that accountability reporting, unlike accounting, can be used to hold corporations to account for actions with externalities that are not entirely captured in revenues and expenses currently defined. The externalities can be positive (e.g., local community-building initiatives) or negative (e.g., environmental pollution, regulatory capture) relative to the state of the world, where the corporation does not engage in the action, and the internalization of externalities into firm decisions may or may not create value for extant shareholders. In this paper, the author develops a framework to study corporate accountability reporting. In developing the framework, the author explicitly approaches corporate accountability as an observed phenomenon, and avoids speculating on whether companies ought to be held to account to customers, employees, and society, outside of shareholder maximization.

    Design/Method/ Approach:

    The author analyzes the phenomenon of corporate accountability reporting and provides an accounting-based conceptual framing.

    • The author argues that delegation necessitates accountability and that such accountability then involves reporting.
    • The author argues that an accountability reporting system is likely to be more useful to a delegator if it: (1) mitigates information advantages across delegates and delegators, (2) reports both stocks and flows in the measures of account, and (3) has a mutually agreeable due process to match across periods the actions of delegates and the outcomes of those actions.
    • The author provides a skeptical appraisal of corporate accountability reporting. He offers three explanations for observed corporate accountability reports. These are: (1) in Milton Friedman’s words, “window dressing,” i.e., a superficial exercise that does not internalize externalities into firm decisions, (2) an attempt at internalizing negative externalities, as identified by one or more firm constituencies, into firm decisions, and (3) an attempt at internalizing positive externalities, as identified by one or more firm constituencies, into firm decisions.
    Corporate Matters