substantial redistribution of wealth within our economy. Considering it as a political process is because of its potential to significantly affect the wellbeing of a wide range of interest groups. This model of political behavior is used by Watts and Zimmerman (1979) arguing that the political process is simply a means of pursuing individual or group self-interest. For example‚ the most recent example of the political process at work in standard setting is the heated debate that occurred on the issue
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Review of Business‚ Vol. 24‚ No. 2‚ pp. 26-32. Ball and Brown (1968): The seed that made a difference‚ Ball‚ R.‚ and Brown‚ P. (1968)‚ “An empirical evaluation of accounting income numbers”‚ Journal of Accounting Research 6 (2)‚ pp.159-178 Watts and Zimmerman (1979)‚ “The Demand for and Supply of Accounting Theories: The Market for Excuses”‚ The Accounting Review‚ Vol. 54‚ No. 2‚ American Accounting Association. ----------------------- 1
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interest of the organisation. Market mechanism would ensure the information published to be prudent. Managers would effort to provide adequate and reliable information to attract investors and therefore to maximize welfare. According to Watts and Zimmerman (1979)‚ corporations produced financial statements voluntarily‚ for example in the US before disclosures became an obligation by government mandate. This means ‘not producing information will be penalized by higher costs of capital‚ resulting to
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Zmijewski (1979) and Zmijewski & Hagerman (1981) have attempted to model what motivates managers in choosing accounting methods‚ This study extends their scope of work by examining the depreciation method choices relationship with agency theory for a set of listed firms in Nigeria. There are several theories that help us to develop hypotheses on the effect of Agency theory and accounting choice as noted by Gopalakrishnan (1994): the positive accounting theory (Leftwich‚ Watts and Zimmerman (1981)
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that raise new questions for research. r 2001 Published by Elsevier Science B.V. JEL classification: D82; G30; G33; G41; M41 Keywords: Reporting decisions; Voluntary disclosure $ This paper has benefited from comments from S.P. Kothari and Ross Watts (the editors)‚ as well as participants at the 2000 JAE Conference. We are also grateful to Tatiana Sandino for research assistance‚ and the Division of Research at the Harvard Business School for financial support. *Corresponding author. Tel.: +1-617-495-1283;
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WHAT HAS THE INVISIBLE HAND ACHIEVED? Ross L. Watts Sloan School Massachusetts Institute of Technology January 27‚ 2006 _____________________________ This paper was presented at the Institute of Chartered Accountants in England & Wales Information for Better Capital Markets Conference in London on December 20‚ 2005. I am grateful to Ryan LaFond‚ Karthik Ramanna‚ Sugata Roychowdhury and Joseph Weber for their comments. All remaining errors are mine. 1. INTRODUCTION When I was invited
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Compare and contrast normative and positive accounting approaches: Definition of PAT: Watts and Zimmerman (1986) defined Pat as a theory that seeks to explain and predicts particular phenomenon. It is concerned with explaining accounting practice. The three basic hypotheses as outlined by Watts and Zimmerman (1978) underlying PAT are: 1. Bonus plan hypothesis: The bonus plan hypothesis is that managers of firms with bonus plans are more likely to use accounting methods that increase current period
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‘Positive Accounting Theory: A Critique’‚ ICFAI Journal of Accounting Research‚ vol. 7‚ no. 4‚ pp. 7-16‚ retrieved 2 May 2012‚ EBSCOhost database. ‘Tax overhaul: government changes at a glance’ 2010‚ The Age‚ 2 May‚ retrieved 2 May 2012‚ Watts‚ R & Zimmerman‚ J 1978‚ ‘Towards a Positive Theory of the Determination of Accounting Standards’‚ Accounting Review‚ vol. 53‚ no. 1‚ pp. 112-135‚ retrieved 3 April 2010 ‚ EBSCOhost database.
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(PAT) and compares it with three standard accounts of science- Popper (1959)‚ Kuhn (1996) and Lakatos (1970). PAT has been one of the most influential accounting research programs during the last four decades. One important comparison to which Watts and Zimmerman (1986) have appealed to popularize and legitimize their approach is that their view of accounting theory is the same as that in science. Thus‚ it is important to examine how far accounting could have been studied in the mould of science and
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are those that ignore the whole world of accounting‚ favouring the interests of those people with wealth of power. However‚ they focus on the problems in and of society‚ not debate which methods of accounting should be employed. Accounting to Watts & Zimmerman (1990‚ page 7) Positive Accounting Theory is concerned with explaining accounting practice. It is designed to explain and predict which firms will and which firms will not use a particular method… but it says nothing as to which method a firm
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