Theory and Analysis

Abstract

The second chapter, Chapter 2, is comprised of two sections. It theorizes the research question and develops a strong ground for the analytical investigations. The first section sets the main framework. It identifies the place and significance of corporate earnings for modern accounting world. It examines the relevance of corporate earnings. The second section theorizes the research question and develops a rigor setup therefor. Chapter 2 helps build the theoretical and analytical foundation. The theory is borrowed from the principal and agent setting while embedding the dominant firm model. It is shown that the GING problem occurs at the nexus of the (conflicting) interests of the principal and the agent and may induce another problem: varying forms of corporate profits; accounting profits and taxable profits.