A Game Theory Approach to Research on Lobbying Activities in Accounting Regulation: Benefits and Issues

Victoria University Centre for Accounting, Governance and Taxation Research Working Paper No. 42

26 Pages Posted: 29 Aug 2008

See all articles by Rachel F. Baskerville

Rachel F. Baskerville

Victoria University of Wellington - School of Accounting and Commercial Law

Multiple version iconThere are 2 versions of this paper

Date Written: 2007

Abstract

There is a lack of consensus on the most appropriate methodological framework for studies of regulation and due process in order to provide robust outcomes and predictive potential. In addition to this diversity of approaches, research typically adopts a "single-event focus" to an examination of due process and regulatory efficiency. The objective of this research is to examine the advantages and issues arising when methodologies offering a multi-event approach are adopted specifically the utility of game theory methodology in accounting lobbying research. The applications of game theory in previous studies in accounting research are summarised (the application to FASB voting rules, auditor-client interaction, and accounting disclosure choices relevant to wage bargaining) and the theoretical basis for studies of lobbying behaviour is also reviewed. The standard model as currently utilised in research on lobbying activities is described, and an alternative dynamic model proposed. Four core issues arise in the application of such a dynamic model: identification of the master game and sub-games, gradual or punctuated equilibrium, agency issues, and reputation effects.

It is apparent from the application of game theory in other areas of accounting research that evolutionary game theory offers a more comprehensive and dynamic model of real-world events, based on multi-period or sequential events. The proposed utility of a game theoretic model in accounting research on due process and regulation justifies further developments in this area.

Keywords: game theory, standard setting, New Zealand, accounting

JEL Classification: C70, M50

Suggested Citation

Baskerville, Rachel F., A Game Theory Approach to Research on Lobbying Activities in Accounting Regulation: Benefits and Issues (2007). Victoria University Centre for Accounting, Governance and Taxation Research Working Paper No. 42 . Available at SSRN: https://ssrn.com/abstract=1237738

Rachel F. Baskerville (Contact Author)

Victoria University of Wellington - School of Accounting and Commercial Law ( email )

Faculty of Commerce and Administration
PO Box 600
Wellington
New Zealand
006444636951 (Phone)
006444635076 (Fax)

HOME PAGE: http://www.victoria.ac.nz/sacl/staff/rachel-baskerville.aspx

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