Overview
Welcome to my video series on Theory Research in Accounting. This page features modules focused on accounting theory. I created these modules in response to a growing interest in integrating theory into empirical research (see, e.g., Chen and Schipper 2016 and Chen, Gerakos, Glode and Taylor 2016). Despite this demand, many academic programs lack faculty who specialize in theoretical accounting. The modules are designed with two main goals:
- For Empirical Researchers: To offer a foundational understanding of accounting theory for those who wish to interpret, apply, or build upon theory in their empirical work.
- For Aspiring Theorists: To provide the basic building blocks necessary for students who are interested in pursuing more advanced topics in theoretical research.
Prerequisites
These modules assume that students have completed a one-year course in microeconomic theory, such as the one taught using Microeconomic Theory by Mas-Colell, Whinston, and Green (commonly referred to as MWG). Specifically, familiarity with the following sections is expected:
- Chapter 3 (pp. 50–56): Utility maximization
- Chapter 6 (pp. 185–191): Risk aversion and common utility functions
- Chapter 10 (pp. 314–316): Competitive equilibria, including the concept of market-clearing prices
Structure and Content
The material is divided into 6 modules, each consisting of 6 lessons. You can find an overview of all topics and lessons here, along with a detailed breakdown below.
For every lesson, you’ll find:
- A video
- The slides used in the lesson
- A lesson summary
- A quick quiz to reinforce the material
- A list of recommended references for further reading
Limitations and Additional Learning
These are concise modules, so some areas are not covered—for example, topics like banking and financial analysts are excluded. Even within the topics that are addressed, certain details are necessarily omitted.
If you’re interested in a deeper dive into accounting theory, Duke offers a summer theory school in even-numbered years (e.g., 2022, 2024, etc.). You can view past topics and content here.
If you have any questions regarding the modules, or the summer school, or accounting theory research in general, feel free to contact me at xu.jiang@duke.edu.
Curriculum
Introduction of the theory modules video (slides, summary)
Module 1: Introduction to theory, traditional models of capital markets and the role of disclosure
Lesson 1: How to consume theory papers as an empirical audience video (slides, summary, quiz)
Lesson 2: Basic math tools useful for consuming theory papers video (slides, summary, quiz)
Key references: DeGroot Optimal Statistical Decisions, Veldkamp (2011)
Lesson 3: Grossman-Stiglitz model – perfect competition models video (slides, summary, quiz)
Key reference: Grossman and Stiglitz (1980)
Lesson 4: Role of disclosure in perfect competition models video (slides, summary, quiz)
Key reference: Goldstein and Yang (2017)
Lesson 5: Kyle model – imperfect competition models video (slides, summary, quiz)
Key reference: Kyle (1985)
Lesson 6: Discrete Kyle model and role of disclosure in imperfect competition models video (slides, summary, quiz)
Module 2: Feedback effects
Lesson 1: Introduction to feedback effects video (slides, summary, quiz)
Key reference: Bond, Edmans and Goldstein (2012)
Lesson 2: A simple illustration of price efficiency and real efficiency video (slides, summary, quiz)
Key reference: Dow and Gorton (1997)
Lesson 3: Feedback effects result in asymmetric trading of private info video (slides, summary, quiz)
Key reference: Edmans, Goldstein and Jiang (2015)
Lesson 4: Feedback effects result in manipulative short selling video (slides, summary, quiz)
Key reference: Goldstein and Guembel (2008)
Lesson 5: Feedback effects can make more disclosure suboptimal video (slides, summary, quiz)
Key reference: Gao and Liang (2013)
Lesson 6: Feedback effects determine what type of managerial information to disclose video (slides, summary, quiz)
Key reference: Goldstein and Yang (2019)
Module 3: Models of agency problems
Lesson 1: Genera insight of moral hazard models video (slides, summary, quiz)
Lesson 2: Illustration of basic moral hazard models video (slides, summary, quiz)
Key reference: Holmstrom (1979)
Lesson 3: Communication of information in moral hazard models video (slides, summary, quiz)
Key reference: Dye (1983)
Lesson 4: Career concern models video (slides, summary, quiz)
Key reference: Holmstrom (1999)
Lesson 5: Basic adverse selection models video (slides, summary, quiz)
Key reference: Myerson and Satterthwaite (1983)
Lesson 6: Credit rationing – An application of the basic adverse selection models video (slides, summary, quiz)
Key reference: Stiglitz and Weiss (1981)
Module 4: Communication games between managers and the market
Lesson 1: Introduction and the unravelling result video (slides, summary, quiz)
Key references: Grossman (1981), Milgrom (1981), Stocken (2013)
Lesson 2: Verifiable disclosure with strategic withholding video (slides, summary, quiz)
Key references: Verrecchia (1983), Dye (1985), Jung and Kwon (1988)
Lesson 3: Modeling skepticism in the capital market video (slides, summary, quiz)
Key reference: Shin (1994)
Lesson 4: Cheap talk models video (slides, summary, quiz)
Key reference: Crawford and Sobel (1982)
Lesson 5: Costly misreporting models video (slides, summary, quiz)
Key references: Stein (1989), Fischer and Verrecchia (2000)
Lesson 6: Bayesian persuasion models video (slides, summary, quiz)
Key reference: Kamenica and Gentzkow (2011)
Module 5: Real effects of accounting disclosures
Lesson 1: Introduction to real effects video (slides, summary, quiz)
Key reference: Kanodia and Sapra (2016)
Lesson 2: Different types of investment distortions video (slides, summary, quiz)
Lesson 3: Real effects of periodic reporting video (slides, summary, quiz)
Key reference: Kanodia and Lee (1998)
Lesson 4: Real effects of measurement noise video (slides, summary, quiz)
Key reference: Kanodia, Singh and Spero (2005)
Lesson 5: Real effects of measuring intangibles video (slides, summary, quiz)
Key reference: Kanodia, Sapra and Venugopalan (2004)
Lesson 6: Real effects of mark-to-market accounting video (slides, summary, quiz)
Key reference: Plantin, Sapra and Shin (2008)
Module 6: Information processing costs and rational inattention
Lesson 1: Introduction to information processing costs video (slides, summary, quiz)
Key references: Grossman and Stiglitz (1980), Goldstein and Yang (2017), Blankespoor, deHaan, and Marinovic (2020)
Lesson 2: Limited attention and how firms present information video (slides, summary, quiz)
Key references: Hirshleifer and Teoh (2003)
Lesson 3: Introduction to rational inattention video (slides, summary, quiz)
Key references: Sims (1998), Sims (2003), Jiang and Yang (2017)
Lesson 4: Rational inattention and portfolio under-diversification video (slides, summary, quiz)
Key reference: Van Nieuwerburgh and Veldkamp (2010)
Lesson 5: Rational inattention and aggregation video (slides, summary, quiz)
Key reference: Lu (2022)
Lesson 6: Rational inattention and disclosure video (slides, summary, quiz)
Key reference: Jiang, Lu and Sapra (2024)
