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Market and Political/Regulatory Perspectives on the Recent Accounting Scandals

65 Pages Posted: 24 Sep 2008 Last revised: 29 Jul 2009

Ray Ball

University of Chicago - Booth School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: November 23, 2008

Abstract

Not surprisingly, the recent accounting scandals look different when viewed from the perspectives of the political/regulatory process and of the market for corporate governance and financial reporting. We do not have the opportunity to observe a world in which either market or political/regulatory processes operate independently, and the events are recent and not well-researched, so untangling their separate effects is somewhat conjectural. This paper offers conjectures on issues such as: What caused the scandalous behavior? Why was there such a rash of accounting scandals at one time? Who killed Arthur Andersen - the SEC, or the market? Did fraudulent accounting kill Enron, or just keep it alive for too long? What is the social cost of financial reporting fraud? Does the US in fact operate a "principles-based" or a "rules-based" accounting system? Was there market failure? Or was there regulatory failure? Or both? Was the Sarbanes-Oxley Act a political and regulatory over-reaction? Does the U.S. follow an ineffective regulatory model?

JEL Classification: M41, M43, M44, M49, G15, G18, G38

Suggested Citation

Ball, Ray, Market and Political/Regulatory Perspectives on the Recent Accounting Scandals (November 23, 2008). Journal of Accounting Research, Vol. 47, No. 2, pp. 277-323, May 2009. Available at SSRN: https://ssrn.com/abstract=1272804

Ray Ball (Contact Author)

University of Chicago - Booth School of Business ( email )

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