Evidence-Based Policymaking: Promise, Challenges and Opportunities for Accounting and Financial Markets Research

56 Pages Posted: 16 Apr 2018 Last revised: 3 May 2018

Christian Leuz

University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI); Center for Financial Studies (CFS); University of Pennsylvania - Wharton Financial Institutions Center; CESifo Research Network

Multiple version iconThere are 3 versions of this paper

Date Written: April 12, 2018

Abstract

The use of evidence and economic analysis in policymaking is on the rise, and accounting standard setting and financial regulation are no exception. This article discusses the promise of evidence-based policymaking in accounting and financial markets as well as the challenges and opportunities for research supporting this endeavor. In principle, using sound theory and robust empirical evidence should lead to better policies and regulations. But despite its obvious appeal and substantial promise, evidence-based policymaking is easier demanded than done. It faces many challenges related to the difficulty of providing relevant causal evidence, lack of data, the reliability of published research, and the transmission of research findings. Overcoming these challenges requires substantial infrastructure investments for generating and disseminating relevant research. To illustrate this point, I draw parallels to the rise of evidence-based medicine. The article provides several concrete suggestions for the research process and the aggregation of research findings if scientific evidence is to inform policymaking. I discuss how policymakers can foster and support policy-relevant research, chiefly by providing and generating data. The article also points to potential pitfalls when research becomes increasingly policy-oriented.

Keywords: Evidence-based policymaking, cost-benefit analysis, regulation, standard setting, accounting, finance, capital markets, causal inferences, political economy

JEL Classification: A11, D61, D72, G18, G38, K22, L51, M48

Suggested Citation

Leuz, Christian, Evidence-Based Policymaking: Promise, Challenges and Opportunities for Accounting and Financial Markets Research (April 12, 2018). European Corporate Governance Institute (ECGI) - Law Working Paper No. 397/2018. Available at SSRN: https://ssrn.com/abstract=3161401 or http://dx.doi.org/10.2139/ssrn.3161401

Christian Leuz (Contact Author)

University of Chicago - Booth School of Business ( email )

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773-834-1996 (Phone)

HOME PAGE: http://faculty.chicagobooth.edu/christian.leuz/

National Bureau of Economic Research (NBER) ( email )

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Cambridge, MA 02138
United States

HOME PAGE: http://www.nber.org

European Corporate Governance Institute (ECGI)

Brussels
Belgium

HOME PAGE: http://www.ecgi.org

Center for Financial Studies (CFS) ( email )

Grüneburgplatz 1
Frankfurt am Main, 60323
Germany

University of Pennsylvania - Wharton Financial Institutions Center

3641 Locust Walk
Philadelphia, PA 19104-6218
United States

CESifo Research Network

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Munich, DE-81679
Germany

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