Comments on Wilson and Jensen

PROFESSORS Jensen and Wilson have provided us with a tantalizing and exciting picture of the ability of their respective fields to shed new light on accounting conundrums. I fully share their enthusiasm. These brief comments, in turn, are an attempt to interpret and channel their remarks, with the hope of accelerating the production of accounting insight. The two papers have much in common. Both emphasize the fact that research on intraand inter-organization equilibrium behavior is mushrooming and now able to accommodate accounting questions in a way never before feasible, or perhaps even imaginable. For example, creation, maintenance, and rental of a reputation is now offered as an important explanatory variable in understanding such diverse activities as (1) audit-client contracting arrangements; (2) monitoring behavior of Boards of Directors; and (3) the structure of the audit industry. Similarly, bonding and inefficient risk sharing, interpreted as restricted residual claims or incentive structures, are offered as substitutes for accounting measurement. Indeed, the choice of accounting method is here viewed as part of the choice of organization form, a choice policed by competition as emphasized by Professor Jensen. The implication here is unmistakable: importation of research on intraand inter-organizational behavior promises to yield new and significant understanding of accounting. Accepting this conclusion brings us to the question of where these insights are likely to be discovered. Professors Jensen and Wilson have been candid on this point. And I will attempt, in the following paragraphs, to hone their list.