Overview

In today's dynamic business landscape, understanding the economic roles of accounting is essential: more than simply measuring change in value, accounting information plays a vital role facilitating exchanges, whether within an organization itself or in capital markets. In The Economics of Accounting, Richard M. Frankel, S. P. Kothari, and Luo Zuo take the view that earnings and other accounting outputs help firms function more efficiently by making contracts more effective, aiding decision-making, bridging information gaps, enabling price discovery, and reducing trading costs. The book provides an overview and analysis of the economic role of financial accounting. Beginning by examining the attributes of accounting earnings and their relation to stock prices, the authors present a strategic analysis of accounting earnings that recognizes the influence they have on decisions made by users and producers. These decisions shape the properties of accounting information and its application in valuation, contracting, and firms' investment choices. The authors argue that accounting information plays a pivotal role in fostering firms' commitment to stakeholder protection, leading to increased value creation for shareholders. The authors offer expert guidance through accounting and its roles in driving efficiency and value creation, unlocking its true potential.

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Richard Frankel is Nicholas Dopuch Professor of Accounting at Washington University in St. Louis. Professor Frankel has taught at Washington University in St. Louis since 2005. Prior to that, he was a professor at the MIT Sloan School of Management and the University of Michigan. At Michigan and MIT, he received the MBA Student Awards for Teaching Excellence. His principal teaching interest is financial accounting and reporting. His research focuses on valuation using accounting numbers and on corporate managers' use of conference calls, earnings forecasts, and pro-forma earnings. Luo Zuo is the Provost's Chair Professor of Accounting and Finance at National University of Singapore (NUS). Professor Zuo received his PhD from the Massachusetts Institute of Technology in 2013, after which he joined Cornell University. At Cornell University, he was granted tenure in 2017 and promoted to full professor in 2022. Professor Zuo holds several editorial positions at top academic journals. He is an editor of the Accounting Review, an associate editor of Management Science and the Journal of Accounting and Economics, and an editorial board member of Review of Accounting Studies. Professor Zuo has also held various leadership positions in academic programs and professional associations. He served as the faculty director of the Cornell-Tsinghua Finance MBA Program and the faculty lead of the Cornell-HKUST Partnership. He currently serves as the director of the PhD Program in Accounting at NUS and the president of the Chinese Accounting Professors' Association of North America. Professor Zuo has received numerous research and teaching awards, including the Cornell-Tsinghua Finance MBA Program Best Teaching Award, the University of Toronto Roger Martin Award for Emerging Leaders, the Journal of Accounting Research Excellence in Refereeing Award, the American Accounting Association FARS Outstanding Discussion Award, the Johnson School Accelerated MBA Core Faculty Award, and the Johnson School Faculty Research Award. His research has been featured in the Economist, the NBER Digest, the Wall Street Journal, and many other media outlets. S. P. Kothari is Gordon Y Billard Professor of Accounting and Finance at MIT's Sloan School of Management. He has senior executive experience in government, academia, and industry with expertise in strategic and policy issues, securities regulation, and corporate governance. Most recently, he was chief economist and director of the Division of Economic and Risk Analysis at the US Securities and Exchange Commission. Previously, Kothari was deputy dean of MIT Sloan School of Management, global head of equity research for Barclays Global Investors; and director of Bombay Stock Exchange; currently he is a director of Velan Studios and EbixCash. Kothari was awarded India's Padma Shri and Honorary Doctorates from London Business School, University of Cyprus, and University of Technology, Sydney. Stephen R. Thorne is a professional actor and a member of the Trinity Repertory Company in Providence, Rhode Island. He has played Hamlet, Henry V, and Tom Joad, among many other roles. Stephen has narrated over fifty audiobooks.

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