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Lobbying and Uniform Disclosure Regulation

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  • HENRY L. FRIEDMAN
  • MIRKO S. HEINLE

Abstract

This study examines the costs and benefits of uniform accounting regulation in the presence of heterogeneous firms that can lobby the regulator. A commitment to uniform regulation reduces economic distortions caused by lobbying by creating a free‐rider problem between lobbying firms at the cost of forcing the same treatment on heterogeneous firms. Resolving this tradeoff, an institutional commitment to uniformity is socially desirable when firms are sufficiently homogeneous or the costs of lobbying to society are large. We show that the regulatory intensity for a given firm can be increasing or decreasing in the degree of uniformity, even though uniformity always reduces lobbying. Our analysis sheds light on the determinants of standard‐setting institutions and their effects on corporate governance and lobbying efforts.

Suggested Citation

  • Henry L. Friedman & Mirko S. Heinle, 2016. "Lobbying and Uniform Disclosure Regulation," Journal of Accounting Research, Wiley Blackwell, vol. 54(3), pages 863-893, June.
    • Handle: RePEc:bla:joares:v:54:y:2016:i:3:p:863-893
    DOI: 10.1111/1475-679X.12118
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    Cited by:

    1. Wu, Sang & Xue, Wenjie, 2023. "Accounting comparability and relative performance evaluation by capital markets," Journal of Accounting and Economics, Elsevier, vol. 75(1).
    2. Kabir, Humayun & Su, Li & Rahman, Asheq, 2020. "Firm life cycle and the disclosure of estimates and judgments in goodwill impairment tests: Evidence from Australia," Journal of Contemporary Accounting and Economics, Elsevier, vol. 16(3).
    3. Anne Beyer & Ronald A. Dye, 2023. "On the Disclosure of Half-Truths and the Duty to Update," Management Science, INFORMS, vol. 69(7), pages 4283-4311, July.
    4. Gao, Pingyang & Jiang, Xu, 2020. "The economic consequences of discrete recognition and continuous measurement," Journal of Accounting and Economics, Elsevier, vol. 69(1).
    5. Anil Arya & Brian Mittendorf & Dae-Hee Yoon, 2021. "The Impact of Uniform Pricing Regulations on Incentives to Generate and Disclose Accounting Information," Management Science, INFORMS, vol. 67(3), pages 1975-1992, March.
    6. Beaumont, Stacey & Clarkson, Peter & Tutticci, Irene, 2018. "Identifying lobbying strategies: An analysis of public responses to the Productivity Commission Inquiry into executive remuneration in Australia," Journal of Contemporary Accounting and Economics, Elsevier, vol. 14(3), pages 288-306.
    7. Henry L. Friedman & Mirko S. Heinle, 2020. "Influence Activities, Coalitions, and Uniform Policies: Implications for the Regulation of Financial Institutions," Management Science, INFORMS, vol. 66(9), pages 4336-4358, September.
    8. Huang, Yong & Yan, Chao, 2020. "Global accounting standards, financial statement comparability, and the cost of capital," International Review of Economics & Finance, Elsevier, vol. 69(C), pages 301-318.

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