Accounting Standards, Regulations and Herd Behavior
It is argued that the current accounting and risk assessment methods have played an important role in developing financial panic. Mark-tomarket models and fair value accounting seem to stand as the basis a market failure and should be replaced by more conservative accounting methods. In this paper we reject this idea, emphasizing the weaknesses of historical cost accounting and mark-to-model financial model. We put the debate in a larger perspective, pointing to the relation between accounting methods and entrepreneurial economic calculation. Also, we criticize the association between fair-value accounting and the current crisis, arguind that the latter is more likely the result of risk regulation that determined herd behavior.
Volume (Year): X (2010)
Issue (Month): 1 (May)
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