Regulation and Governmental Accounting: Commentary on R. Penny Marquette and Jesse F. Marquette
Ehsan H. Feroz
University of Washington - Tacoma-Milgard School of Business; Vernon Zimmerman Center, University of Illinois; US Government Accountability Office
July 25, 2008
RESEARCH IN GOVERNMENTAL AND NONPROFIT ACCOUNTING, James L. Chan, ed., Vol. 8, pp. 95-102, 1994
Regulatory studies in economics and political science have debated the efficiency and wealth re-distributive potentials of regulations. While Stigler and the Chicago School of economics have focused on the market (informational) efficiency implications of a regulation, political scientists traditionally highlight the wealth re-distributive potentials of a regulation. Unbeknown to many political economists, accounting studies have made significant contributions in terms of documenting the wealth re-distributive potentials of financial accounting standards (e.g., Watts and Zimmerman 1986; Feroz 1987; Ball and Smith 1992; Feroz and Hagerman 1990; and Brown and Feroz 1992). While the focus of these studies have been limited to the immediate claimants to the resources of an entity (managers, shareholders, and bondholders), their potentials for being applied to wider stakeholders such as the citizens and taxpayers is unlimited. Political economists can benefit from these models in their attempts to demonstrate the wealth re-distributive potentials of other regulations.
Apart from the issue of allocative efficiency of a regulation which is frequently a black box, there is also the issue of production efficiency implications of a regulation which has not been addressed adequately either in mainstream economics or elsewhere in social science. Accounting (particularly, managerial) data can provide a fertile basis for measuring the production efficiency implications of a regulation (e.g, Feroz, Raab, and Haag 2001; Raab and Feroz 2007; and Feroz, Raab, Ulleberg and Alsharif 2008). Interestingly, this provides another effective way of testing the theories of regulation - a favorite pastime for generations of political economists.
Number of Pages in PDF File: 6
Keywords: Regulation, Accounting, Political Economy, Production Efficiency
JEL Classification: L3, L51, M4, P16Accepted Paper Series
Date posted: July 27, 2008 ; Last revised: June 16, 2009
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