Theory & Prediction Development (jar-theory-development)
When to trigger
- Predictions are descriptive ("X is associated with Y") with no economic channel
- A referee asks "what is the mechanism?" or "why would a rational agent do this?"
- The sign of the effect is ambiguous and needs an explicit argument
- You need to motivate an empirical prediction from an analytical/agency model
How JAR theorizes: economics first
JAR's dominant tradition is positive, economics-based accounting research. Predictions are derived from the behavior of informed economic agents — managers, investors, analysts, auditors, regulators — under asymmetric information, contracting frictions, and proprietary costs. The relevant toolkit is information economics (signaling, disclosure, adverse selection), agency/contracting theory (incentives, monitoring, debt covenants), market price-formation logic (how information enters prices and expectations, in the Ball-Brown lineage), and standard-setting/political-economy arguments. This is not the latent-construct, mediator-moderator style of psychology-based fields: a JAR mechanism is an economic argument about incentives and information, often disciplined by a simple model.
Build the mechanism
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Name the friction. Information asymmetry between whom and whom? A contracting incompleteness? A proprietary cost? The friction is what makes accounting information matter.
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Specify the agent's problem. What does the manager/investor/auditor maximize, and how does the accounting variable change their optimal action or belief?
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Sign the prediction. State the predicted direction and why. If two channels push opposite ways (transparency vs. proprietary cost; recognition vs. disclosure), say so and let the data adjudicate — an ex-ante ambiguous sign is acceptable if argued, but it must be argued.
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Derive observable implications. Beyond the main effect, predict cross-sectional variation: where should the effect be stronger (high information asymmetry, weak governance, binding covenants)? These conditional predictions make the channel testable and separate it from alternatives.
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Consider a model. Analytical work is welcome at JAR; a stylized model that yields the comparative static you test sharpens the prediction and pre-empts "story-time" critiques.
Registered Reports note
On the Registered Reports track, the theory and signed predictions are locked in the Stage 1 protocol before data are seen — strong a priori derivation is essential because in-principle acceptance is granted on the protocol's quality, not the eventual results.
Checklist
Anti-patterns
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Construct-chain theorizing: psychology-style mediators with no economic agent or friction.
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Sign by hand-waving: predicting a direction with no incentive argument.
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Kitchen-sink hypotheses: many associations, no unifying mechanism.
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Mechanism only in the title: a channel asserted in the intro but never tested cross-sectionally.
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Rational/behavioral muddle: invoking efficiency and mispricing interchangeably without committing.
Output format
【Friction】information asymmetry / agency / proprietary cost (between whom)
【Agent's problem】who maximizes what; role of the accounting variable
【Main prediction(s)】sign + economic reason
【Conditional predictions】where stronger/weaker (and why)
【Model?】comparative static derived / not needed
【Alternative explanations to rule out】[...]
【Next step】jar-literature-positioning or jar-methods
Resources
