• logistics for the course,
• outline of the course,
• historical perspective in chapter 1,
• reasons for asymmetric information between management and shareholders,
• potential conflict of interest between management and shareholders,
• potential problems of adverse selection and moral hazard and what they are,
• what kind of accounting methods can reduce the adverse selection and moral hazard problems,
• what kind of accounting methods can improve the operation of the capital markets and the operation of the managerial labor market, and
• current value accounting being a balance sheet focused approach and historical accounting being an income statement focused approach.

• trade offs between current value accouning and historical cost accounting,
• balanced sheet focused approached and income statement focused approach,
• relevance versus reliability,
• reduction of adverse selection and moral hazard problems,
• converting inside info to outside info versus improve corporate governance,
• helps the operation of the capital market and managerial labor market,
• decision usefulness, information, and measurement approach,
• ideal condition versus probability certain and the resulting financial outcomes,
• definition of relevance and reliability,
• objective and subjective probabilities,
• the kind of trade-offs between current value accounting and historical cost accounting, and
• non-existence of true net income.

• review of calculation of financials under absolute certainty and probability certainty,
• prior and posteria probabilities,
• calculation of bayes theorem on updating of prior probabilities, and
• application of dollar and utilities to the bayes probabilities calculation.

• review of bayes theorem on updating of view,
• calculation based on bayes theorem,
• efficient market,
• fully and partially informative market, and
• estimation risk.

• determination of normal and abnormal returns,
• determination of expected and unexpected news,
• narrow versus wide windows in event studies,
• earnings response coefficient (ERC), and
• public goods for financial information provision.

• presentation of group 1 research paper,
• presentation of group 2 research paper,
• review of chapter 5 ERC and consequences of information being a public good,
• review of behavior finance behavior, and
• prospect theory.

• presentation of group 3 research paper,
• review of chapter 6 outline,
• auditor liability reason for measurement perspective,
• conditional and unconditional conservatism,
• concepts of clean surplus theory for firm valuation,
• use and calculation of ROE, and
• use and calculation of cost of equity using CAPM model's beta.

• presentation of group 4 and 5 research paper,
• review of chapter 6 outline, behavior finance, inefficient market, auditor liability reasons, and
• calculation of firm valuation using clean surplus theory.

• presentation of group 6 and 7 research paper,
• introduction to theory of economic consequence,
• introduction to positive accounting theory (PAT),
• bonus plan, debt, political cost hypothesis of PAT,
• contract efficiency and opportunistic reason, and
• options used for employee stock option plan.

• presentation of group 8 research paper,
• theory of economic consequence,
• options used for ESO plan,
• positive accounting theory (PAT),
• bonus plan, debt covenants, and political cost hypothesis of PAT, and
• contract efficiency and opportunistic reason.

• presentation of group 9 research paper,
• mid-term questions review,
• practice writing questions, and
• introduction to game theory and Nash equilibrium.

• review of scope of the course,
• graphical review of the concepts in this course,
• game theory,
• how to reduce moral hazard problem by employment contract,
• revelation principle,
• contract rigidity,
• use of net income and share price as management performance measurement, and
• precision versus sensitivity of using net income and share price.

• use of net income and share price as management performance measurement,
• precision versus sensitivity of using net income and share price,
• how to increase the sensitivity of net income,
• the risk in executive compensation,
• how to control compensation risk,
• why are ESOP worth less to managers than to the firm,
• Power theory of executive compensation,
• patterns of and motivations for earnings management,
• good and bad side of earnings management,
• nature of information production,
• market failure and private incentives for information production, and
• public interest theory and interest group theory.

For this course, a general purpose non-financial calcuator can be used. Students who do not have ready access to a financial calculator should be able to perform all the required analysis and calculations using a general purpose non-financial calculator for the tutorials, assignments, mid-term test, and final examination.

You can also use a non-programmable financial calculator for the tutorials, assignment, mid-term test, and final examination. Common financial calculators are HP12c and TI BAII PLUS. User manual in simplified chinese and a tutorial for the HP12c can be found here and a simple tutorial for the HP12c can be found here. User manual for the TI BAII can be found here.

Regardless of the types of calculators used for this course, students are responsible for their own equipment and they cannot be shared in a quiz, test, or examination situation. As a result, students MUST bring their own calculators to each class. In addition, each student must be proficient in the use of their own equipment.

Electronic translators CANNOT be used for quiz, test, or examination situations, but they can be used during class (only with volume off) and your own study time.

There are specific terms that apply to accounting and finance, and there are various online sources that can help students understand these terms.

Download and print for reference:

• Hong Kong Exchange glossary of terms (English to Chinese)
• 88translation.com finance dictionary (Chinese to English, English to Chinese)

Online finance dictionaries:

• Reuters Chinese to English and English to Chinese finance dictionary
• Goldman Sachs English to Chinese finance dictionary
• Goldman Sachs Chinese to English finance dictionary
• Morgan Stanley English to Chinese finance dictionary

Other unverified sources of financial references:

• Finance Street - a finance related site prepared by the government
• Financial glossary of terms
• List of dictionaries