‘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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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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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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Longman Cheshire. Holthausen‚ R W and R L Watts (2002)‚ “The relevance of the value relevance literature for financial accounting standard setting”‚ in Kothari et al (2002)‚ pp I 3-75. Jones‚ S‚ C Romano and J Ratnatunga (eds) (1995)‚ Accounting Theory: a contemporary review‚ Sydney‚ Harcourt Brace Kothari‚ S P (2002)‚ “Capital markets research in accounting”‚ in Kothari et al (2002)‚ I 105-231. Kothari‚ S P‚ T Z Lys‚ D J Skinner‚ R L Watts and J L Zimmerman (2002)‚ Contemporary Accounting Research
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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
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other stakeholder parties’ direction towards a healthy economic decision in favor of the business. Regulation of these information and standardizing the process would lead to that organization solving the problem of ‘information asymmetry’. (Watts & Zimmerman‚ 1978) The Free-Market perspective The free market perspective to accounting regulation replicates the nature of a product in a market‚ where ‘demand’ and ‘supply’ plays significant roles. Accounting information is treated as any other normal
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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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executives. In 1984‚ a man by the name of Paul M. Healy conducted a research paper on the association between managers’ accrual and accounting procedures and income reporting. Healy was testing the hypothesis of earlier works by namely Watts (1977) and Watts and Zimmerman (19787) that managers have an incentive to adjust earnings through accruals to increase the size of their bonuses as well as change accounting policies following changes in bonus plan structure. These earlier tests presented conflicting
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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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of divergent behaviour that arises as a result of the agency relationship are referred to as agency costs. Furthermore‚ Watts and Zimmerman (1978) developed the theory of positive accounting which is focused on the assumption that ‘all individual action is driven by self-interest and that individuals will act in an opportunistic manner to increase their wealth’. Based on Watts and Zimmerman’s theory‚ Deegan suggests that owners would expect managers to undertake activities that might not always
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