Unravelling the existence of the necessity and sufficiency of accounting information

Serge Agbodjo, Konan Anderson Seny Kan, Solomon George Zori, Khaled Hussainey*

*Corresponding author for this work

    Research output: Contribution to journalArticlepeer-review

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    Purpose: The authors illustrate accounting information's effects in terms of necessity and sufficiency, using a set-theoretic approach, and highlight how the approach complements conventional correlational analyses.

    Design/methodology/approach: The authors examine the relationship between accounting numbers (accounting information) and stock prices (effect) under both correlational and set-theoretic perspectives using a value relevance methodology.

    Findings: The claim that accounting information is significantly correlated to an outcome does not inform the accounting information's necessity or sufficiency. In addition, findings suggest that not all control variables that are significantly correlated to a supposed accounting effect are necessary to explain that effect. Moreover, variables reflecting accounting information are not individually sufficient to explain the effect under investigation.

    Research limitations/implications: The study contributes to set-theoretic approach to accounting research and echoes the call for a diversity of research approaches in accounting.

    Practical implications: The study may have practical implications for various accounting information users, including investors, financial analysts and financial market and accounting disclosure regulators as well. Indeed, accounting information users should consider the importance of the combined effect of multiple pieces of accounting information in the users' positions on firms' stocks. Understanding what might be the relevant combinations of accounting information associated with a given organizational context is a key in making compelling accounting-informed decisions. Such knowledge can inform reflections of accounting disclosures and regulations on the combined effects of several accounting information.

    Originality/value: First, the study adds to the newly introduced set-theoretic approach to empirical accounting. The study also resonates with the call for a diversity of research approaches in accounting. The authors empirically demonstrate that significant correlation between accounting information and its effects does not connote “necessity” or “sufficiency,” which is rather revealed by qualitative comparative analysis (QCA). Such complementarity can help accounting researchers to carry out (1) new investigations of accounting's earlier hypotheses or propositions and (2) investigations of new accounting hypotheses/propositions deriving from existing accounting theories and (3) to explore new relationships between accounting phenomena. Second, the study incidentally contributes to value relevance literature in terms of contextualization of the relevance of accounting information. Specific to the African capital markets, the study complements the few recent studies on the Bourse Régionale des Valeurs Mobilières d’Abidjan (BRVM).
    Original languageEnglish
    Number of pages19
    JournalJournal of Applied Accounting Research
    Early online date9 Feb 2022
    Publication statusEarly online - 9 Feb 2022


    • accounting numbers
    • correlational analysis
    • set-theoretic approach
    • value relevance
    • necessity
    • sufficiency


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