Towards an Understanding of the Role of Standard Setters in Standard Setting

54 Pages Posted: 29 May 2010 Last revised: 25 May 2012

Abigail M. Allen

Brigham Young University - Marriott School; Harvard University - Accounting & Control Unit

Karthik Ramanna

Harvard University - Harvard Business School; University of Oxford - Blavatnik School of Government

Date Written: May 24, 2012

Abstract

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

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

Abigail M. Allen

Brigham Young University - Marriott School ( email )

Provo, UT
United States

Harvard University - Accounting & Control Unit ( email )

Soldiers Field
Boston, MA 02163
United States

Karthik Ramanna (Contact Author)

Harvard University - Harvard Business School ( email )

Boston, MA 02163
United States

University of Oxford - Blavatnik School of Government ( email )

10 Merton St
Oxford, Oxfordshire OX1 4JJ
United Kingdom

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