[et_pb_section fb_built="1" specialty="on" _builder_version="4.9.3" _module_preset="default" custom_padding="0px|0px|0px|||"][et_pb_column type="3_4" specialty_columns="3" _builder_version="3.25" custom_padding="|||" custom_padding__hover="|||"][et_pb_row_inner _builder_version="4.9.3" _module_preset="default" custom_margin="|||-44px|false|false" custom_margin_tablet="|||0px|false|false" custom_margin_phone="" custom_margin_last_edited="on|tablet" custom_padding="28px|||||"][et_pb_column_inner saved_specialty_column_type="3_4" _builder_version="4.9.3" _module_preset="default"][et_pb_text _builder_version="4.9.3" _module_preset="default" hover_enabled="0" sticky_enabled="0"]
-
- QUESTION
Efficient Contracting Approach to Decision Usefulness
[/et_pb_text][et_pb_text _builder_version="4.9.3" _module_preset="default" width_tablet="" width_phone="100%" width_last_edited="on|phone" max_width="100%"]
| Subject |
Essay Writing |
Pages |
2 |
Style |
APA |
[/et_pb_text][/et_pb_column_inner][/et_pb_row_inner][et_pb_row_inner module_class="the_answer" _builder_version="4.9.3" _module_preset="default" custom_margin="|||-44px|false|false" custom_margin_tablet="|||0px|false|false" custom_margin_phone="" custom_margin_last_edited="on|tablet"][et_pb_column_inner saved_specialty_column_type="3_4" _builder_version="4.9.3" _module_preset="default"][et_pb_text _builder_version="4.9.3" _module_preset="default" width="100%" custom_margin="||||false|false" custom_margin_tablet="|0px|||false|false" custom_margin_phone="" custom_margin_last_edited="on|desktop"]
Answer
Efficient Contracting Approach to Decision Usefulness
Efficient contracting theory outlines the purpose of financial accounting information in regulating information asymmetry among contracting parties, thus leading to efficient contracting and corporate governance (Stanley, 2016). Due to the survival bias in the business environment, the theory suggests that for a contract to be interred into by two parties, it must be efficient and for it to be efficient, there must be no information asymmetry. This paper discusses efficient contracting theory in relations to Manitoba Harvest, a hemp-food processing company based in Winnipeg.
Efficiency in contracting is usually affected by information asymmetry since organization managers usually possess inside information regarding the financial state of the company, and may not be willing to share the same with contracting partners. Managers are also in apposition to distort financial accounting information to their favor before sharing the information (Stanley, 2016). Furthermore, their management efforts are not directly identifiable by the outsiders. Therefore, contracting parties depend on accounting information to protect their interests. For example, in the case of Manitoba Harvest Ltd, the firm maintains a reputation for high-quality financial accounting reporting which has appalled to creditors and investors. After reporting approximately C$37.9 million net revenue in 2014, the company attracted investment worth $102.7 million from Compass Group Diversified Holdings LLC in 2015. Again, financial statements reveal that the company has had Steady net sales from$ 40,586,000 in 2015 to $ 59,323,000 in 2026 and $55,699,000 in 2017 (Compass Diversified Holdings (CODI), 2017). Such information reported in financial statements enables contracting parties to make useful investment decisions. Types of contracts that require this information include, debt contracts, bonus, and managerial compensation contracts and operational contracts arising from the relationship with customers, investors, and creditors.
The efficient contracting theory assumes that organization managers like investor and creditors are rational; therefore, they cannot be expected to work in the best interest of the firm all the time by maximizing profits. Instead, they act in the best interest of the firm if they perceive the outcome to be in their best interest. This shows that the interest of different stakeholders in an organization differs. This theory presents how these conflicts of interest can be solved.
References
|
|
Compass Diversified Holdings. (2017). Annual report. NASDAQ. Retrieved from http://www.annualreports.com/HostedData/AnnualReports/PDF/NASDAQ_CODI_2017.pdf
Stanley, A. (2016). The Efficient Contracting Approach to Decision Usefulness. Retrieved from https://docplayer.net/9458294-Chapter-8-the-efficient-contracting-approach-to-decision-usefulness.html
Appendix
|
Appendix A:
Communication Plan for an Inpatient Unit to Evaluate the Impact of Transformational Leadership Style Compared to Other Leader Styles such as Bureaucratic and Laissez-Faire Leadership in Nurse Engagement, Retention, and Team Member Satisfaction Over the Course of One Year
|
|
|
|
|
|
|
[/et_pb_text][/et_pb_column_inner][/et_pb_row_inner][et_pb_row_inner _builder_version="4.9.3" _module_preset="default" custom_margin="|||-44px|false|false" custom_margin_tablet="|||0px|false|false" custom_margin_phone="" custom_margin_last_edited="on|desktop" custom_padding="60px||6px|||"][et_pb_column_inner saved_specialty_column_type="3_4" _builder_version="4.9.3" _module_preset="default"][et_pb_text _builder_version="4.9.3" _module_preset="default" min_height="34px" custom_margin="||4px|1px||"]
Related Samples
[/et_pb_text][et_pb_divider color="#E02B20" divider_weight="2px" _builder_version="4.9.3" _module_preset="default" width="10%" module_alignment="center" custom_margin="|||349px||"][/et_pb_divider][/et_pb_column_inner][/et_pb_row_inner][et_pb_row_inner use_custom_gutter="on" _builder_version="4.9.3" _module_preset="default" custom_margin="|||-44px||" custom_margin_tablet="|||0px|false|false" custom_margin_phone="" custom_margin_last_edited="on|tablet" custom_padding="13px||16px|0px|false|false"][et_pb_column_inner saved_specialty_column_type="3_4" _builder_version="4.9.3" _module_preset="default"][et_pb_blog fullwidth="off" post_type="project" posts_number="5" excerpt_length="26" show_more="on" show_pagination="off" _builder_version="4.9.3" _module_preset="default" header_font="|600|||||||" read_more_font="|600|||||||" read_more_text_color="#e02b20" width="100%" custom_padding="|||0px|false|false" border_radii="on|5px|5px|5px|5px" border_width_all="2px" box_shadow_style="preset1"][/et_pb_blog][/et_pb_column_inner][/et_pb_row_inner][/et_pb_column][et_pb_column type="1_4" _builder_version="3.25" custom_padding="|||" custom_padding__hover="|||"][et_pb_sidebar orientation="right" area="sidebar-1" _builder_version="4.9.3" _module_preset="default" custom_margin="|-3px||||"][/et_pb_sidebar][/et_pb_column][/et_pb_section]