Corporate Financial Statements, A Product of the market and political processes
Ross L. Watts
Massachusetts Institute of Technology (MIT) - Sloan School of Management
Australian Journal of Management, Vol. 4, April, 1977
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.
Number of Pages in PDF File: 42
Keywords: Financial reporting, accounting theory
JEL Classification: M41, M44, G34, G38, D82Accepted Paper Series
Date posted: July 21, 2006
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