实证会计理论

nullPositive Accounting Theory: A Ten Year PerspectivePositive Accounting Theory: A Ten Year PerspectiveRoss L. Watts and Jerold L. Zimmerman THE ACCOUNTING REVIEWABSTRACTABSTRACTThis paper reviews and critiques the positive accounting literature following publication of Watts and Zimmerman (1978, 1979). The 1978 paper helped generate the positive accounting literature which offers an explanation of accounting practice, suggests the importance of contracting costs, and has led to the discovery of some previously unknown empirical regularities. The 1979 paper produced a methodological debate that has not been very productive.ABSTRACTABSTRACTThis paper attempts to remove some common misconceptions about methodology that surfaced in the debate. It also suggests ways to improve positive research in accounting choice. The most important of these improvements is tighter links between the theory and the empirical tests. A second suggested improvement is the development of models that recognize the endogeneity among the variables in the regressions. A third improvement is reduction in measurement errors in both the dependent and independent variables in the regressions.StructureStructureI. Evolution and State of Positive Accounting Theory II. Criticisms of Positive Accounting Research III. Summary and ConclusionsI. Evolution and State of Positive Accounting TheoryI. Evolution and State of Positive Accounting Theory1.1 Evolution 1.2 Contemporaneous Positive Accounting Theory 1.3 Evidence on the TheoryI. Evolution and State of Positive Accounting TheoryI. Evolution and State of Positive Accounting Theory1.1 Evolution Modern positive accounting research began flourishing in the 1960s when Ball and Brown (1968), Beaver (1968). and others introduced empirical finance methods to financial accounting. The subsequent literature adopted the assumption that accounting numbers supply information for security market investment decisions and used this "information perspective" to investigate the relation between accounting numbers and stock prices. The "information perspective" has not provided hypotheses to explain why entire industries switch from accelerated to straight-line depreciation without changing their tax depreciation methods.I. Evolution and State of Positive Accounting TheoryI. Evolution and State of Positive Accounting Theory1.1 Evolution An important reason that the information perspective failed to generate hypotheses explaining and predicting accounting choice is that in the finance theory underlying the empirical studies, accounting choice per se could not affect firm value. To predict and explain accounting choice accounting researchers had to introduce information and/or transactions costs. The initial empirical studies in accounting choice used positive agency costs of debt and compensation contracts and positive information and lobbying costs in the political process to generate value effects for and, hence, hypotheses about accounting choice. Finance researchers had introduced costs of debt that increase with the debt/equity ratio to explain how optimal capital structures could vary across industries.I. Evolution and State of Positive Accounting TheoryI. Evolution and State of Positive Accounting Theory1.1 Evolution The agency costs were of particular interest to accountants because accounting appeared to play a role in minimizing them. Debt contracts apparently aimed at reducing dysfunctional behavior use accounting numbers. Accounting researchers recognized the implications for accounting choice and began using the accounting numbers in debt contracts to generate hypotheses about accounting choice. Accounting numbers also are used in manager's compensation contracts and it is hypothesized that such use again minimizes agency costs. This use of accounting numbers in bonus plans suggested the possibility that accounting choice could affect wealth and so accounting researchers began employing that use to explain accounting choice. I. Evolution and State of Positive Accounting TheoryI. Evolution and State of Positive Accounting Theory1.1 Evolution Borrowing from the industrial organization literature in economics which assumes positive information costs and lobbying costs, accounting researchers postulated that the political process generated costs for firms. These political costs are a function of reported profits. Thus, incentives are created to manage reported accounting numbers. Information and lobbying costs are part of the costs of "contracting" in the political process. The extent and form of the wealth transfers created by the political process (such as the tax code) are affected by these contracting costs.I. Evolution and State of Positive Accounting TheoryI. Evolution and State of Positive Accounting Theory1.1 Evolution While the early literature concentrated on using debt and compensation contracts and the political process to explain and predict accounting choice, the theory underlying the empirical work was more general and had its foundation in an economic literature on the theory of the firm. Since the 1970s economists have strived to develop a theory of the firm by attempting to explain the organizational structure of the firm (e.g., choice of corporate form, structure of contracts, management compensation, centralization-decentralization). The underlying notion is that competition among different forms of institutions leads to the survival of those forms most cost-effective in supplying goods and services.I. Evolution and State of Positive Accounting TheoryI. Evolution and State of Positive Accounting Theory1.1 Evolution It was a short step to suggest that accounting methods affect the firm's organizational costs and so the accounting methods that survive are the result of a similar economic equilibrium. Accounting researchers have recently returned to using that notion of an efficient set of accounting methods to explain accounting choice. The agency costs associated with debt and management compensation contracts and the agency, information, and other contracting costs associated with the political process provided the hypotheses tested in the early empirical accounting choice studies. I. Evolution and State of Positive Accounting TheoryI. Evolution and State of Positive Accounting Theory1.1 Evolution However, the more general approach suggested agency and other costs associated with other contracts could also affect accounting choice, this potential for many contracts to play a role in explaining organizational choice (including accounting choice) and the fact that agency costs used to explain the contracts often arise in contractual scenarios that differ from those of the standard agency problem led researchers to start to use the term "contracting costs" instead of agency costs. The concept of contracting costs and the notion of accounting methods as part of efficient organizational technology play key roles in contemporaneous positive accounting theory.I. Evolution and State of Positive Accounting TheoryI. Evolution and State of Positive Accounting Theory1.2 Contemporaneous Positive Accounting Theory Contracting costs arise in (1) market transactions (2)transactions internal to the firm and (3) transactions in the political process (e.g., securing government contracts or avoiding government regulation requires lobbying costs). Contracting costs consist of transaction costs (e.g., brokerage fees), agency costs (e.g., monitoring costs, bonding costs, and the residual loss from dysfunctional decisions), information costs (e.g., the costs of becoming informed), renegotiation costs (e.g., the costs of rewriting existing contracts because the extant contract is made obsolete by some unforeseen event), and bankruptcy costs (e.g., the legal costs of bankruptcy and the costs of dysfunctional decisions).I. Evolution and State of Positive Accounting TheoryI. Evolution and State of Positive Accounting Theory1.2 Contemporaneous Positive Accounting Theory The existence of contracting costs is crucial to models of both the organization of the firm and accounting choice. Meckling and Jensen (1986) suggest that within the firm the lack of a market price is replaced by systems for allocating decisions among managers, and measuring, rewarding, and punishing managerial performance. Accounting plays a role in these systems and so appears to be part of the firm's efficient contracting technology. Trying to predict and explain the organization of the firm with zero contracting costs is pointless. The extent to which accounting choice affects the contracting parties' wealth depends on the relative magnitudes of the contracting costs. Thus, developing a positive theory of accounting choice requires an understanding of the relative magnitudes of the various types of contracting costs.I. Evolution and State of Positive Accounting TheoryI. Evolution and State of Positive Accounting Theory1.2 Contemporaneous Positive Accounting Theory Contracts that use accounting numbers are not effective in aligning managers‘ and contracting parties' interests if managers have complete discretion over the reported accounting numbers, then we say the managers acted "opportunistically.“ The set of accounting procedures within which managers have discretion is called the "accepted set." It is voluntarily determined by the contracting parties. The "accepted set" is predicted to vary across firms with the variation in the costs and benefits of restrictions. These restrictions produce the "best" or "accepted" accounting principles even without mandated accounting standards by government. The restrictions are enforced by external auditors. Reacting to the incentive of managers to exercise accounting discretion opportunistically, the accepted set includes "conservative" and "objective“ accounting procedures. I. Evolution and State of Positive Accounting TheoryI. Evolution and State of Positive Accounting Theory1.2 Contemporaneous Positive Accounting Theory Relation Between the Accepted Set of Accounting Methods and the Choice of Method from within the Accepted Set. A 1 denotes the set of accepted methods for firm 1 A2 denotes the set of accepted methods for firm 2 X1 denotes the choice of method from within the accepted set by firm 1 X2 denotes the choice of method from within the accepted set by firm 2I. Evolution and State of Positive Accounting TheoryI. Evolution and State of Positive Accounting Theory1.2 Contemporaneous Positive Accounting Theory Variations across sets of accepted accounting procedures (e.g., A1 and A2 ) explain some cross-sectional variation in accounting choice (e.g., managers in firm 2 cannot choose method X1). Most accounting choice studies assume managers choose accounting methods to transfer wealth to themselves at the expense of another party to the firm because they can take the firm's observed contracts as given and then determine managers' incentives for accounting choice. However, no study to date has explained both the ex ante choice of the accepted set and the ex post choice of accounting method from within the accepted set. Most studies that assume opportunistic choice of accounting methods do not control for the fact that managers in different firms likely are choosing accounting methods from different constrained accepted sets. I. Evolution and State of Positive Accounting TheoryI. Evolution and State of Positive Accounting Theory1.2 Contemporaneous Positive Accounting Theory The accepted set of accounting methods is one part of the firm's implicit and explicit contracts including the firm's capital structure, compensation plans, and ownership structure. All the contracting provisions (including the accounting policies) are endogenous. Capital structure choice is related to compensation policy and to accounting policy. But, the relation is not necessarily causal. Capital structure changes do not cause changes in the accepted set of accounting methods. Rather, some exogenous event, such as a new invention or government deregulation occurs and this causes changes in the contracting variables including accounting methods.I. Evolution and State of Positive Accounting TheoryI. Evolution and State of Positive Accounting Theory1.3 Evidence on the Theory Two types of tests of the theory have been conducted: stock price tests and accounting choice tests. The stock price tests have been reviewed extensively elsewhere. Stock price tests of the theory reveal some price reactions to mandatory accounting changes, especially involving oil and gas accounting. Stock price studies are probably relatively weak tests of the theory. The more promising ones are accounting choice studies. Most accounting choice studies attempt to explain the choice of a single accounting method instead of the choice of combinations of accounting methods. Focusing on a single accounting method reduces the power of the tests since managers are concerned with how the combination of methods affects earnings instead of the effect on just one particular accounting method. Accounting accruals aggregate into a single measure the net effect of all accounting choices. But use of accruals as a summary measure of accounting choice suffers from a lack of control of what accruals would be without managerial accounting discretion.I. Evolution and State of Positive Accounting TheoryI. Evolution and State of Positive Accounting Theory1.3 Evidence on the Theory Most accounting choice studies use combinations of three sets of variables: variables representing the manager's incentives to choose accounting methods under bonus plans, debt contracts, and the political process. The literature has tended to state each of these hypotheses as managers behaving opportunistically. The early tests of the bonus hypothesis are not very powerful tests of the theory because they rely on simplifications of the theory. A bonus plan does not always give managers incentives to increase earnings. If, earnings are below the minimum level required for payment of a bonus, managers have incentive to reduce earnings this year because no bonuses are likely paid. Taking such an "earnings bath" increases expected profits and bonuses in future years. By using bonus plan details to identify situations where managers are expected to reduce earnings, Healy's (1985) tests encompass more kinds of manipulation. His results are consistent with managers manipulating net accruals to affect their bonuses.I. Evolution and State of Positive Accounting TheoryI. Evolution and State of Positive Accounting Theory1.3 Evidence on the Theory The debt/equity hypothesis predicts the higher the firm's debt/equity ratio. the more likely managers use accounting methods that increase income. The evidence is generally consistent with the debt/equity hypothesis. The association between leverage and accounting method choice is an empirical regularity unknown prior to the positive accounting studies. The political cost hypothesis predicts that large firms rather than small firms are more likely to use accounting choices that reduce reported profits. Size is a proxy variable for political attention. the assumption that it is costly for individuals to become informed about whether accounting profits really represent monopoly profits and to "contract" with others in the political process to enact laws and regulations that enhance their welfare. Given the cost of information and monitoring, managers have incentive to exercise discretion over accounting profits and the parties in the political process settle for a rational amount of ex post opportunism.I. Evolution and State of Positive Accounting TheoryI. Evolution and State of Positive Accounting Theory1.3 Evidence on the Theory The evidence is consistent with the political cost hypothesis. However, the result only appears to hold for the largest firms and is driven by the oil and gas industry. Difficulties with using firm size to proxy for political costs, including the likelihood that it can proxy for many other effects, such as industry membership etc. The interesting finding is the consistency of the sign of the relation between size and accounting choice across a variety of studies. The largest firms tend to use income decreasing accounting methods. Presently, there is no alternative theory for the empirical regularity between firm size and accounting choice other than the political cost hypothesis. While bonus, debt, and political process variables tend to be statistically significant in many studies the explanatory power of the models is low. The real issue is the lack of an alternative model with greater explanatory power, not the low explanatory power of the extant theory. Several problems with the existing research methods contribute to the low explanatory power.II. Criticisms of Positive Accounting ResearchII. Criticisms of Positive Accounting Research2.1 Research Method Issues 2.2 Philosophy of Science IssuesII. Criticisms of Positive Accounting ResearchII. Criticisms of Positive Accounting Research2.1 Research Method Issues The first research method issue involves the tests' lack of power. The second issue involves the possibility that the results obtained in the positive accounting literature are due to unrecognized alternative hypotheses, not the stated hypotheses. Reductions in the tests' power. Tests of the theory lack power for several reasons: 2.1.1 problems with model specification, 2.1.2 problems specifying the left-hand-side variables 2.1.3 problems specifying the right-hand-side variables 2.1.4 omitted variables. II. Criticisms of Positive Accounting ResearchII. Criticisms of Positive Accounting Research2.1 Research Method Issues 2.1.1 Problems with model specification. All the studies to date have assumed accounting choice results either from efficiency reasons or managerial opportunism. This produces two model specification errors. First, in probit type regressions where the choice of accounting method depends on the effect of the choice on the manager's wealth, the right-hand-side or explanatory variables reflect the wealth effects of the choice via compensation plans, debt agreements, and the political process. Implicitly researchers are holding constant the firm's investment opportunity set and contracts and interpret the compensation plan variable as managerial opportunism. But, the debt and political variables can represent both efficiency and opportunism. Thus, the model is mis-specified. The second specification error results from ignoring the interaction effects among the right-hand-side variables.II. Criticisms of Positive Accounting ResearchII. Criticisms of Positive Accounting Research2.1 Research Method Issues 2.1.1 Problems with model specification (Cont’l). However, in the empirical models the right-hand-side variables are treated as additive and interaction effects are ignored. Solving these two specification problems requires researchers to specify the inter-temporal interaction between opportunism (including managerial reputation incentives) and efficiency effects.II. Criticisms of Positive Accounting ResearchII. Criticisms of Positive Accounting Research2.1 Research Method Issues 2.1.2 Left-hand-side variable. Problems specifying the accounting choice variable reduce the power of the tests. One such problem mentioned earlier is the use of single method choices as the left-hand-side variable. Some accounting decisions that affect accruals have been made earlier and are probably beyond the manager's discretion at the time of the measurement. Ideally, net accruals should be measured relative to what they would be without manipulation, so these variations are excluded from the left-hand-side variable. This requires a model of accruals that currently does not exist.II. Criticisms of Positive Accounting ResearchII. Criticisms of Positive Accounting Research2.1 Research Method Issues 2.1.3 Right-hand-side va