Towards an Understanding of the Role of Standard Setters in Standard Setting
Abigail M. Allen
Harvard University - Accounting & Control Unit
Harvard University - Harvard Business School
May 24, 2012
Journal of Accounting & Economics (JAE), Forthcoming
Harvard Business School Accounting & Management Unit Working Paper No. 10-105
We investigate the effect of standard setters in standard setting: We examine how certain professional and political characteristics of FASB members and SEC commissioners predict the accounting “reliability” and “relevance” of proposed standards. Notably, we find FASB members with backgrounds in financial services are more likely to propose standards that decrease “reliability” and increase “relevance,” partly due to their tendency to propose fair-value methods. We find opposite results for FASB members affiliated with the Democratic Party, although only when excluding financial-services background as an independent variable. Jackknife procedures show that results are robust to omitting any individual standard setter.
Number of Pages in PDF File: 54
Keywords: accounting, FASB, politics, relevance, reliability, standard setting
JEL Classification: D72, D78, G18, K22, L51, M41
Date posted: May 29, 2010 ; Last revised: May 25, 2012
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