[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/a/sae/ausman/v2y1977i1p53-75.html
   My bibliography  Save this article

Corporate Financial Statements, A Product of the Market and Political Processes

Author

Listed:
  • Ross L. Watts

    (Graduate School of Management, University of Rochester. An early version of this paper was presented at the Annual Congress of the New South Wales Branch of the Institute of Chartered Accountants in Australia in June, 1974. Many of the ideas in that early paper evolved from discussions I had with M. Jensen while we were trying to write a paper on accounting theory. The concepts in this paper are substantially more developed than in the original paper. Some of those developments were conceived during attempts by J. Zimmerman and myself to test hypotheses generated by the 1974 paper. A major development, the structure of the Agency Problem, was provided by Jensen and Meckling (1976). Thus, I owe a great deal to Jensen, Meckling and Zimmerman. However, they are not responsible for any errors in the paper. I am also indebted to G. Benston, R. Holthausen, M. Krasney, R. Leftwich and C. Smith for their helpful comments and suggestions.)

Abstract
An outline for a theory of financial statements is presented. Financial statements are viewed as products of both markets and political processes and the interactions among individuals and groups in these processes. Individuals are assumed to maximize their self-interests. Various hypotheses and data are provided to illustrate the theory. It relies heavily on theories of agency, economic regulation and public choice. At this stage, the theory has great promise in explaining the form and contents of financial statements. The theory contrasts with earlier “normative†theories of financial statements and offers an explanation for the forms they take.

Suggested Citation

  • Ross L. Watts, 1977. "Corporate Financial Statements, A Product of the Market and Political Processes," Australian Journal of Management, Australian School of Business, vol. 2(1), pages 53-75, April.
    • Handle: RePEc:sae:ausman:v:2:y:1977:i:1:p:53-75
    DOI: 10.1177/031289627700200104
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.1177/031289627700200104
    Download Restriction: no
    File URL: https://libkey.io/10.1177/031289627700200104?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Henry G. Manne, 1969. "Economic Policy and the Regulation of Corporate Securities," Books, American Enterprise Institute, number 917976, September.
    2. William F. Sharpe, 1964. "Capital Asset Prices: A Theory Of Market Equilibrium Under Conditions Of Risk," Journal of Finance, American Finance Association, vol. 19(3), pages 425-442, September.
    3. Dopuch, N, 1974. "Studies On Financial Accounting Objectives - 1974 - Introduction," Journal of Accounting Research, Wiley Blackwell, vol. 12, pages 2-2.
    4. Gonedes, Nj & Dopuch, N, 1974. "Capital Market Equilibrium, Information Production, And Selecting Accounting Techniques - Theoretical Framework And Review Of Empirical Work," Journal of Accounting Research, Wiley Blackwell, vol. 12, pages 48-169.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Joseph Aharony & Sasson Bar†Yosef, 1987. "Tests of the impact of LIFO adoption on stockholders: A stochastic dominance approach," Contemporary Accounting Research, John Wiley & Sons, vol. 3(2), pages 430-444, March.
    2. Karim Jamal & Michael Maier & Shyam Sunder, 2003. "Privacy in E‐Commerce: Development of Reporting Standards, Disclosure, and Assurance Services in an Unregulated Market," Journal of Accounting Research, Wiley Blackwell, vol. 41(2), pages 285-309, May.
    3. Cornett, Marcia Millon & Rezaee, Zabihollah & Tehranian, Hassan, 1996. "An investigation of capital market reactions to pronouncements on fair value accounting," Journal of Accounting and Economics, Elsevier, vol. 22(1-3), pages 119-154, October.
    4. van Lent, L.A.G.M., 1995. "Pressure and politics in financial accounting regulation," Research Memorandum FEW 686, Tilburg University, School of Economics and Management.
    5. Steven Johnson, 1984. "Demand-revealing processes and accounting standard-setting," Public Choice, Springer, vol. 42(1), pages 3-24, January.
    6. van Lent, L.A.G.M., 1995. "Pressure and politics in financial accounting regulation," Other publications TiSEM 5ae3c9e9-0adb-4d81-b455-9, Tilburg University, School of Economics and Management.
    7. Brown, Lawrence D., 1996. "Influential accounting articles, individuals, Ph.D. granting institutions and faculties: A citational analysis," Accounting, Organizations and Society, Elsevier, vol. 21(7-8), pages 723-754.
    8. McManus, Ginette & Saint-Pierre, Jacques & Domonkos, John, 1995. "Formal strategic planning, informedness and firm performance: An empirical investigation," Global Finance Journal, Elsevier, vol. 6(1), pages 47-63.
    9. Shi, Huai-Long & Zhou, Wei-Xing, 2022. "Factor volatility spillover and its implications on factor premia," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 80(C).
    10. Ho, Ron Yiu-wah & Strange, Roger & Piesse, Jenifer, 2006. "On the conditional pricing effects of beta, size, and book-to-market equity in the Hong Kong market," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 16(3), pages 199-214, July.
    11. Muhammad Kashif & Thomas Leirvik, 2022. "The MAX Effect in an Oil Exporting Country: The Case of Norway," JRFM, MDPI, vol. 15(4), pages 1-16, March.
    12. Michel Fliess & Cédric Join, 2009. "Systematic risk analysis: first steps towards a new definition of beta," Post-Print inria-00425077, HAL.
    13. Barbara Fidanza & Ottorino Morresi, 2021. "Size and Value Anomalies in European Bank Stocks," International Journal of Business and Management, Canadian Center of Science and Education, vol. 13(12), pages 227-227, July.
    14. Bo-Hung Chiou & Shen-Ho Chang, 2020. "Influence of Investment Efficiency by Managers and Accounting Conservatism on Idiosyncratic Risks to Investors," Advances in Management and Applied Economics, SCIENPRESS Ltd, vol. 10(1), pages 1-8.
    15. Constantinos Antoniou & John A. Doukas & Avanidhar Subrahmanyam, 2016. "Investor Sentiment, Beta, and the Cost of Equity Capital," Management Science, INFORMS, vol. 62(2), pages 347-367, February.
    16. Radosław Kurach, 2013. "Does Beta Explain Global Equity Market Volatility – Some Empirical Evidence," Contemporary Economics, University of Economics and Human Sciences in Warsaw., vol. 7(2), June.
    17. Zabolotnyy, Serihiy & Wasilewski, Mirosław, 2018. "Operating and financial leverage as risk measures in agricultural companies," Problems of Agricultural Economics / Zagadnienia Ekonomiki Rolnej 276377, Institute of Agricultural and Food Economics - National Research Institute (IAFE-NRI).
    18. Shi, Yun & Cui, Xiangyu & Zhou, Xunyu, 2020. "Beta and Coskewness Pricing: Perspective from Probability Weighting," SocArXiv 5rqhv, Center for Open Science.
    19. Abugri, Benjamin A. & Dutta, Sandip, 2014. "Are we overestimating REIT idiosyncratic risk? Analysis of pricing effects and persistence," International Review of Economics & Finance, Elsevier, vol. 29(C), pages 249-259.
    20. David E. Allen & Michael McAleer & Abhay K. Singh, 2019. "Daily market news sentiment and stock prices," Applied Economics, Taylor & Francis Journals, vol. 51(30), pages 3212-3235, June.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sae:ausman:v:2:y:1977:i:1:p:53-75. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: SAGE Publications (email available below). General contact details of provider: http://www.agsm.edu.au .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.