Accounting Quality in Railway Companies During the 19th and 20th Centuries: The Case of Spanish NORTE and MZA

Accounting and Business Research, Forthcoming

63 Pages Posted: 12 Jun 2018 Last revised: 1 May 2019

See all articles by Beatriz Santos-Cabalgante

Beatriz Santos-Cabalgante

Universidad Autónoma de Madrid

Beatriz Garcia Osma

Universidad Carlos III de Madrid - Department of Business Administration

Domi Romero

Universidad Autónoma de Madrid

Date Written: May 22, 2018

Abstract

Prior literature studying railway accounting during the 19th and 20th centuries defends the thesis of lack of reliability of accounting figures. This prior research, which mainly studies the cases of the United Kingdom and the United States, offers mixed views on the causes, or simply accepts this thesis without providing conclusive evidence, as is the case of historical research in Spain. We provide novel evidence on the quality of railway accounting and contribute to this prior debate by: (1) analysing the accounting for two material accruals: depreciation and prior period adjustments; (2) studying the persistence of earnings and its components; and (3) analysing how accrual accounting affects persistence. These analyses are conducted for the period 1856-1939 for the two major Spanish railway companies (MZA and NORTE). The reported evidence suggests that earnings are highly persistent. However, we show that there are significant differences across firms and that these differences are particularly obvious when analysing the adjustments for prior period earnings. Overall, our evidence does not support the thesis that accounting was underdeveloped, but rather, that managerial accounting choices lowered accounting quality.

Keywords: Accounting history, Accounting quality, Railway Accounting, Earnings Persistence, Spanish Railways

Suggested Citation

Santos-Cabalgante, Beatriz and Garcia Osma, Beatriz and Romero, Domi, Accounting Quality in Railway Companies During the 19th and 20th Centuries: The Case of Spanish NORTE and MZA (May 22, 2018). Accounting and Business Research, Forthcoming. Available at SSRN: https://ssrn.com/abstract=3183254

Beatriz Santos-Cabalgante (Contact Author)

Universidad Autónoma de Madrid ( email )

Campus Cantoblanco
Ctra. Colmenar, Km. 15
Madrid, Madrid 28049
Spain

Beatriz Garcia Osma

Universidad Carlos III de Madrid - Department of Business Administration ( email )

Calle Madrid 126
Getafe, Madrid, Madrid 28903
Spain

Domi Romero

Universidad Autónoma de Madrid ( email )

Campus Cantoblanco
C/Kelsen, 1
Madrid, Madrid 28049
Spain

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