Rules-Based Accounting Standards and Litigation
61 Pages
Posted: 5 Jan 2010
Last revised: 11 Feb 2012
University of Texas at Austin - McCombs School of Business
University of Texas at Austin - Department of Accounting
University of Iowa - Henry B. Tippie College of Business
Date Written: February 9, 2012
Abstract
Some claim that rules-based accounting standards shield firms from litigation, while others argue that violations of detailed rules give plaintiffs a “roadmap” to successful litigation. We inform this debate by investigating whether rules-based standards are associated with the incidence of securities class action litigation. Overall, our results suggest that rules-based accounting standards are associated with a lower incidence of litigation. These results are of interest in the debate regarding the switch from a more rules-based U.S. GAAP to a more principles-based IFRS.
Keywords: Securities litigation, safe harbor, rules-based standards, principles-based standards
JEL Classification: K22, K41, M41
Suggested Citation:
Suggested Citation
Donelson, Dain C. and McInnis, John M. and Mergenthaler, Richard, Rules-Based Accounting Standards and Litigation (February 9, 2012). Accounting Review, Forthcoming; McCombs Research Paper Series No. ACC-06-10. Available at SSRN: https://ssrn.com/abstract=1531782 or http://dx.doi.org/10.2139/ssrn.1531782
