Unravelling the existence of the necessity and sufficiency of accounting information

Purpose – We illustrate accounting information’s effects in terms of necessity and sufficiency, using a set-theoretic approach, and highlight how this approach complements conventional correlational analyses.

Design/methodology/approach – We 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 its necessity nor its 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.

Originality/value – The study shows complementarities between correlational and set-theoretic analyses. It also opens new advancement opportunities in accounting theories and helps reinforcing accounting knowledge.