Positive Accounting Theory
Positive Accounting Theory: A Ten Year Perspective Author(s): Ross L. Watts and Jerold L. Zimmerman Reviewed work(s): Source: The Accounting Review, Vol. 65, No. 1 (Jan., 1990), pp. 131-156 Published by: American Accounting Association Stable URL: http://www.jstor.org/stable/247880 . Accessed: 31/10/2011 02:22
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THE ACCOUNTING REVIEW Vol. 65, No. 1 January 1990 pp. 131-156
Positive
A
Accounting Year
Theory:
Ten
Perspective
Ross L. Watts and Jerold L. Zimmerman
University of Rochester
ABSTRACT: This paper reviews and critiques the positive accounting literature following publication of Watts and Zimmerman (1978, 1979). The 1978 paper helped generate the positive accounting literature which offers an explanation of accounting practice, suggests the importance of contracting costs, and has led to the discovery of some previously unknown empirical regularities. The 1979 paper produced a methodological debate that has not been very productive. This paper attempts to remove some common misconceptions about methodology that surfaced in the debate. It also suggests ways to improve positive research in accounting choice. The most important of these improvements is tighter links between the theory and the empirical tests. A second suggested improvement is the development of models that recognize the endogeneity
Your use of the JSTOR archive indicates your acceptance of the Terms & Conditions of Use, available at . http://www.jstor.org/page/info/about/policies/terms.jsp JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact support@jstor.org.
American Accounting Association is collaborating with JSTOR to digitize, preserve and extend access to The Accounting Review.
http://www.jstor.org
THE ACCOUNTING REVIEW Vol. 65, No. 1 January 1990 pp. 131-156
Positive
A
Accounting Year
Theory:
Ten
Perspective
Ross L. Watts and Jerold L. Zimmerman
University of Rochester
ABSTRACT: This paper reviews and critiques the positive accounting literature following publication of Watts and Zimmerman (1978, 1979). The 1978 paper helped generate the positive accounting literature which offers an explanation of accounting practice, suggests the importance of contracting costs, and has led to the discovery of some previously unknown empirical regularities. The 1979 paper produced a methodological debate that has not been very productive. This paper attempts to remove some common misconceptions about methodology that surfaced in the debate. It also suggests ways to improve positive research in accounting choice. The most important of these improvements is tighter links between the theory and the empirical tests. A second suggested improvement is the development of models that recognize the endogeneity