• introduction to course,
• grading of the course,
• research papers for group project,
• historical melt downs and effects,
• relevence versus reliability,
• current value versus historical cost accounting,
• separation of management and ownership,
• asymmetric information, and
• adverse selection and moral hazard problems.

• 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 certainty and the resulting financial outcomes,
• definition of relevance and reliability,
• differences in revenue recognition, recognition lag, and matching of revenue and cost between current value accounting and historical cost accounting,
• objective and subjective probabilities,
• the kind of trade-offs between current value accounting and historical cost accounting, and
• non-existence of true net income.

• introduction to bayes theorem and its assumptions,
• prior and posteria probabilities,
• calculation of updating of prior probabilities using bayes theorem, and
• how accounting information can help investors make decisions.

• Ch 3 practice questions on bayes theorem,
• efficient market,
• fully and partially informative market, and
• the cause and results of estimation risk.

• review of bayes theorem on updating of view,
• efficient market,
• estimation risk, and
• review and Q&A for mid-term test.

• presentation of research paper #1,
• presentation of research paper #2,
• decision usefulness approach,
• normal and abnormal returns,
• expected and unexpected news,
• earnings response coefficient (ERC), and
• public goods for financial information provision.

• 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 4 and 5,
• review of chapter 5,
• review of chapter 6 outline,
• reasons for measurement approach,
• behavioral finance and market efficiency, and
• Prospect Theory.

• presentation 6 and 7,
• review of behavioral finance and market efficiency,
• Prospect Theory,
• reduced r squared of accounting information on share price,
• concepts of clean surplus theory for firm valuation,
• unbiased and biased accounting,
• auditor liability reason for measurement perspective, and
• conditional and unconditional conservatism.

• presentation 8 and 9,
• Chapter 6 review,
• calculation of firm valuation using Clean Surplus Theory, and
• discussed the usage of finance theories and other topics on the role of financial theories given the behaviorial financial effects found.

• Chapter 6 review,
• contract efficiency theory,
• contract rigidity,
• managers abuse of stock options, and
• efficient contracting view or opportunistic view of contract theory.

• review of scope of final exam,
• 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,
• 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, and
• Power theory of executive compensation.

• real actions and accrual decisions granted to managers,
• patterns of earnings management,
• incentives for earnings management,
• good and bad earnings management,
• review of scope of final exam,
• 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,
• 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, and
• Power theory of executive compensation.

Mid-term test at classroom B303 from 6 pm to 7:45 pm. Chapters 1 to 4 are included EXCEPT for the following sections: Sections 1.2 and 1.3, Section 2.4, Sections 3.5 to 3.7, and Section 4.5. Questions are mixed calculating and written with two calculating components. You can use a non-programmable calculator but you cannot use mobile calculator or dictionary. No sharing of calculators, you must bring your own working calculator.

Presentation 8: Zhang, Y., Uchida, K., and Hua B. (2013). How do accounting standards and insiders’ incentives affect earnings management? Evidence from China.

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