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Towards an understanding of the role of standard setters in standard setting

Author

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  • Allen, Abigail
  • Ramanna, Karthik

Abstract

We investigate the effect of standard setters in standard setting. We examine how certain professional and political characteristics of FASB members and SEC commissioners predict the accounting “reliability” and “relevance” of proposed standards. Notably, we find FASB members with backgrounds in financial services are more likely to propose standards that decrease “reliability” and increase “relevance,” partly due to their tendency to propose fair-value methods. We find opposite results for FASB members affiliated with the Democratic Party, although only when excluding financial-services background as an independent variable. Jackknife procedures show that results are robust to omitting any individual standard setter.

Suggested Citation

  • Allen, Abigail & Ramanna, Karthik, 2013. "Towards an understanding of the role of standard setters in standard setting," Journal of Accounting and Economics, Elsevier, vol. 55(1), pages 66-90.
  • Handle: RePEc:eee:jaecon:v:55:y:2013:i:1:p:66-90
    DOI: 10.1016/j.jacceco.2012.05.003
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    References listed on IDEAS

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    8. S. P. Kothari & Susan Shu & Peter D. Wysocki, 2009. "Do Managers Withhold Bad News?," Journal of Accounting Research, Wiley Blackwell, vol. 47(1), pages 241-276, March.
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    Citations

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    Cited by:

    1. Bertomeu, Jeremy & Magee, Robert P., 2015. "Mandatory disclosure and asymmetry in financial reporting," Journal of Accounting and Economics, Elsevier, vol. 59(2), pages 284-299.
    2. repec:eee:reacre:v:27:y:2015:i:2:p:138-159 is not listed on IDEAS
    3. Mary E. Barth, 2015. "Financial Accounting Research, Practice, and Financial Accountability," Abacus, Accounting Foundation, University of Sydney, vol. 51(4), pages 499-510, December.
    4. Macve Richard, 2013. "“Trading Places”: A UK (and IFRS) Comment," Accounting, Economics, and Law: A Convivium, De Gruyter, vol. 4(1), pages 27-40, April.
    5. repec:eee:advacc:v:35:y:2016:i:c:p:62-74 is not listed on IDEAS
    6. repec:eee:crpeac:v:44:y:2017:i:c:p:1-29 is not listed on IDEAS
    7. Fanning, Kirsten & David Piercey, M., 2014. "Internal auditors’ use of interpersonal likability, arguments, and accounting information in a corporate governance setting," Accounting, Organizations and Society, Elsevier, vol. 39(8), pages 575-589.
    8. Glover Jonathan, 2014. "Have Academic Accountants and Financial Accounting Standard Setters Traded Places?," Accounting, Economics, and Law: A Convivium, De Gruyter, vol. 4(1), pages 17-26, February.
    9. Erb, Carsten & Pelger, Christoph, 2015. "“Twisting words”? A study of the construction and reconstruction of reliability in financial reporting standard-setting," Accounting, Organizations and Society, Elsevier, vol. 40(C), pages 13-40.

    More about this item

    Keywords

    Accounting; FASB; Politics; Relevance; Reliability; Standard setting;

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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