In this paper we establish an equivalence between accounting numbers and information. The information numbers are denominated in entropy which is a measure of uncertainty and is a function of probabilities only. Mutual information is defined as the reduction of entropy when an information source...

We study the intertemporal properties of accounting conservatism with a focus on managerial incentives. In our main model, conservatism results in smaller expected payouts to the manager (agent) in early periods and larger expected payouts in later periods. Conservatism shifts (ambiguous)...