The Influence of Elections on the Accounting Choices of Governmental Entities

Journal of Accounting Research, Forthcoming

49 Pages Posted: 2 Feb 2011 Last revised: 30 Jan 2012

See all articles by Reining Petacchi

Reining Petacchi

Georgetown University - Department of Accounting and Business Law

Nolan Kido

University of Hawaii - Shidler College of Business

Joseph Weber

Massachusetts Institute of Technology (MIT) - Sloan School of Management

Date Written: January 29, 2011

Abstract

This paper investigates whether gubernatorial elections affect state governments’ accounting choices. We identify two accounts, the compensated absence liability account and the unfunded pension liability account, which provide incumbent gubernatorial candidates with flexibility for manipulation. We find that in an election year, the liability associated with compensated absences and unfunded pension liabilities are both systematically lower. We also find that the variation in these employment related liabilities is correlated with proxies for the incumbent’s incentives and ability to manipulate their accounting reports. Jointly these results suggest that state governments manipulate accounting numbers to present a healthier financial picture in an election year.

Suggested Citation

Petacchi, Reining and Kido, Nolan Y. and Weber, Joseph Peter, The Influence of Elections on the Accounting Choices of Governmental Entities (January 29, 2011). Journal of Accounting Research, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1753198 or http://dx.doi.org/10.2139/ssrn.1753198

Reining Petacchi

Georgetown University - Department of Accounting and Business Law ( email )

McDonough School of Business
Washington, DC 20057
United States

Nolan Y. Kido

University of Hawaii - Shidler College of Business ( email )

2404 Maile Way
Honolulu, HI 96822
United States

Joseph Peter Weber (Contact Author)

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

100 Main Street
E62-416
Cambridge, MA 02142
United States
617-253-4310 (Phone)

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