During economic crises, sovereign states and central banks support the general economy and firms with a range of emergency measures, such as the allocation of subsidies to enterprises and to citizens. The sudden availability of money without the need for any consideration by the recipient leads the way to inappropriate conduct known as moral hazard, such as diversion or improper use of the financial resources received. The moral hazard arises from the individual tendency to rational behavior when in the presence of information asymmetry, inadequate controls, or favorable contractual positions. To reduce moral hazard, and to preserve the intentionality of the States, information asymmetry must be reduced. Avoiding moral hazard is particularly important in cases such as the COVID-19 pandemic, but also during economic crises and other emergency situations. This paper conceptualizes a relevant topic for economy and accounting fields of study, because information tends to be naturally asymmetrical. Traditional accounting is limited by the fact that some accounting practices or techniques can be used to reduce the effect of the pandemics on economic performance of organizations. In our study we propose a way to reduce the natural subjectivity in accounting and reporting, using blockchain and smart contracts technologies, as a solution to information asymmetry during crises (such as economic ones or pandemics).

Accounting for pandemics and economic crises management: moral hazard, blockchain and smart-contracts

Christian Rainero;Riccardo Coda;Alessandro Migliavacca
2020

Abstract

During economic crises, sovereign states and central banks support the general economy and firms with a range of emergency measures, such as the allocation of subsidies to enterprises and to citizens. The sudden availability of money without the need for any consideration by the recipient leads the way to inappropriate conduct known as moral hazard, such as diversion or improper use of the financial resources received. The moral hazard arises from the individual tendency to rational behavior when in the presence of information asymmetry, inadequate controls, or favorable contractual positions. To reduce moral hazard, and to preserve the intentionality of the States, information asymmetry must be reduced. Avoiding moral hazard is particularly important in cases such as the COVID-19 pandemic, but also during economic crises and other emergency situations. This paper conceptualizes a relevant topic for economy and accounting fields of study, because information tends to be naturally asymmetrical. Traditional accounting is limited by the fact that some accounting practices or techniques can be used to reduce the effect of the pandemics on economic performance of organizations. In our study we propose a way to reduce the natural subjectivity in accounting and reporting, using blockchain and smart contracts technologies, as a solution to information asymmetry during crises (such as economic ones or pandemics).
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Accounting, Pandemic, Economic, Crises, Moral Hazard, Blockchain.
Christian Rainero, Riccardo Coda, Alessandro Migliavacca
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/2318/1762170
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