Incentives for Accounting Policy Choice by Australian Life Insurers: Further Evidence on the Information Asymmetry Perspective
Posted: 24 Feb 1997
Date Written: December 1996
Prior research has demonstrated that switching to newly available accounting techniques can reduce the degree of information asymmetry by making financial statements more informative to investors. Life insurers incur contracting costs as a mechanism to resolve their information asymmetry problems. I predict that managers of Australian life insurers with greater information asymmetry are more likely to voluntarily use jointly-developed Australian and New Zealand life insurance accounting standards (LIAS) when it first became available. Results support this prediction, even after controlling for other variables commonly used in prior studies to investigate accounting policy choices by firms.
JEL Classification: M41, M44, D82
Suggested Citation: Suggested Citation