54 Pages Posted: 29 May 2010 Last revised: 25 May 2012
Date Written: May 24, 2012
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.
Keywords: accounting, FASB, politics, relevance, reliability, standard setting
JEL Classification: D72, D78, G18, K22, L51, M41
Suggested Citation: Suggested Citation
Allen, Abigail M. and Ramanna, Karthik, Towards an Understanding of the Role of Standard Setters in Standard Setting (May 24, 2012). Journal of Accounting & Economics (JAE), Forthcoming; Harvard Business School Accounting & Management Unit Working Paper No. 10-105. Available at SSRN: https://ssrn.com/abstract=1617398 or http://dx.doi.org/10.2139/ssrn.1617398
By Ray Ball