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How does changing measurement change management behaviour? A review of the evidence

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  • Anne Beatty

Abstract

The effect of a change in accounting standards on reporting firms' economic behaviour is often a concern raised by those opposing the accounting change. Some view these changes in behaviour as an inevitable consequence of a rule change. Others are not persuaded by these arguments. Although the empirical evidence of changes in economic behaviour is not extensive, it is consistent with accounting changes resulting in firms changing both operating and financing decisions. The evidence of which economic incentives give rise to these changes is more limited. Changes in economic behaviour appear consistently to be related to the regulatory use of accounting numbers. In addition, some evidence related to incentives created by management compensation and by market discipline has been found. Evidence of the importance of debt covenants in inducing accounting changes is less convincing given limited examination of actual debt contracts and the use of poor proxies of covenant slack. The existing research does little to tell us whether any changes in behaviour are for the better or for the worse.

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  • Anne Beatty, 2007. "How does changing measurement change management behaviour? A review of the evidence," Accounting and Business Research, Taylor & Francis Journals, vol. 37(S1), pages 63-71.
    • Handle: RePEc:taf:acctbr:v:37:y:2007:i:s1:p:63-71
    DOI: 10.1080/00014788.2007.9730086
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    References listed on IDEAS

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    3. Xiaomeng Chen & Andreas Hellmann & Safdar R. Mithani, 2020. "The Effect of Fair Value Adjustments on Dividend Policy Under Mandatory International Financial Reporting Standards Adoption: Australian Evidence," Abacus, Accounting Foundation, University of Sydney, vol. 56(3), pages 436-453, September.
    4. Abigail Allen & Reining C. Petacchi, 2023. "Preparer Opposition and Strategic Implementation of Governmental Accounting Standards: Evidence from Public Pension Accounting Reform," Management Science, INFORMS, vol. 69(7), pages 4259-4282, July.
    5. Dean Hanlon, 2019. "Mandatory accounting change and debt covenant violation: Additional evidence from SFAS 150," Australian Journal of Management, Australian School of Business, vol. 44(3), pages 355-387, August.
    6. Linda Hughen, 2010. "When Do Accounting Earnings Matter More than Economic Earnings? Evidence from Hedge Accounting Restatements," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 37(9‐10), pages 1027-1056, November.

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