Abstract
| Original language | English |
|---|---|
| Journal | Journal of Accounting Research |
| Publication status | Accepted/In press - 2020 |
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Keywords
- Accounting Regulation
- Fair Value
- Financial Crisis
- Ideology
- Political Economy
- Accounting Standard-Setting
- Stock Option Expensing
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Why do politicians intervene in accounting regulation? The role of ideology and special interests. / Bischof, Jannis; Daske, Holger; Sextroh, Christoph J.
In: Journal of Accounting Research, 2020.Research output: Contribution to journal › Article › Scientific › peer-review
TY - JOUR
T1 - Why do politicians intervene in accounting regulation? The role of ideology and special interests
AU - Bischof, Jannis
AU - Daske, Holger
AU - Sextroh, Christoph J.
PY - 2020
Y1 - 2020
N2 - Political economy explains the behavior of politicians by regulatory capture and by ideology. Politicians frequently intervene in the regulation of financial accounting. Prior evidence from the accounting literature shows that regulatory capture by special interests explains these interventions. Politicians tend to view accounting regulation as a technical issue where ideological views play a minor role. However, many accounting rules directly lead to economic or social consequences, such as income distribution or private-sector subsidies. The perception of these consequences varies with a politician’s ideology. Therefore, if accounting rules produce those consequences, ideology plausibly spills over and also explains a politician’s stance on the technical accounting issue, beyond special interest pressure. We use two prominent political debates about fair value accounting during the financial crisis and the expensing of employee stock options to disentangle the role of ideology from special interest pressure. In both debates, ideology explains politicians’ involvement at exactly those points when the debate focuses on the economic consequences of accounting regulation (i.e., bank bail-outs and top-management compensation). Once the debates focus on more technical issues, political connections to special interests remain the most dominant force.
AB - Political economy explains the behavior of politicians by regulatory capture and by ideology. Politicians frequently intervene in the regulation of financial accounting. Prior evidence from the accounting literature shows that regulatory capture by special interests explains these interventions. Politicians tend to view accounting regulation as a technical issue where ideological views play a minor role. However, many accounting rules directly lead to economic or social consequences, such as income distribution or private-sector subsidies. The perception of these consequences varies with a politician’s ideology. Therefore, if accounting rules produce those consequences, ideology plausibly spills over and also explains a politician’s stance on the technical accounting issue, beyond special interest pressure. We use two prominent political debates about fair value accounting during the financial crisis and the expensing of employee stock options to disentangle the role of ideology from special interest pressure. In both debates, ideology explains politicians’ involvement at exactly those points when the debate focuses on the economic consequences of accounting regulation (i.e., bank bail-outs and top-management compensation). Once the debates focus on more technical issues, political connections to special interests remain the most dominant force.
KW - Accounting Regulation
KW - Fair Value
KW - Financial Crisis
KW - Ideology
KW - Political Economy
KW - Accounting Standard-Setting
KW - Stock Option Expensing
M3 - Article
JO - Journal of Accounting Research
JF - Journal of Accounting Research
SN - 0021-8456
ER -