Reflections on the State of Accounting Research and the Regulation of Accounting

Stanford Lectures In Accounting, pp. 11-19, 1976

27 Pages Posted: 11 Nov 2002  

Michael C. Jensen

Social Science Electronic Publishing (SSEP), Inc.; Harvard Business School; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI); Harvard University - Accounting & Control Unit


I have two separate but related topics to cover today. The first is a
critical appraisal of the state of accounting research, and the second is an
analysis of current trends in the regulation of accounting practices and where
they are leading us.

Research in accounting has been (with one or two notable exceptions)
unscientific. Why? Because the focus of this research has been
overwhelmingly normative and definitional. As a result, the field has produced
remarkably little theory or evidence bearing on positive issues. I am not
claiming that accounting lacks theories. Quite the contrary; accountants
promulgate theories (Edwards and Bell [1961], Sprouse and Moonitz [1962],
Chambers [1966], ASOBAT [1966], Ijiri [1967], Sterling [1970]), as rapidly as
the SEC increases disclosure requirements. But in accounting the term theory
has come to mean normative proposition.

I do not intend my emphasis here on positive analysis to imply that normative issues
regarding what should be are unimportant. Neither academics nor professionals,
however, will make significant progress in obtaining answers to the normative questions
they continue to ask until they make a more serious attempt to develop a body of positive
theory. It is in this sense that I believe much of what is classified as accounting research
is useless. The dearth of positive theory explains the almost complete lack of impact of
normative accounting research on professional practice. Furthermore, the belief held by
many professionals that the new Professional Schools of Accounting will somehow
improve accounting research, itself implies a disappointment with the payoffs from past
accounting research. This failure has not been quite as dramatic in the managerial
accounting area where issues such as capital budgeting and transfer pricing have received
considerable attention.

Suggested Citation

Jensen, Michael C., Reflections on the State of Accounting Research and the Regulation of Accounting. Stanford Lectures In Accounting, pp. 11-19, 1976. Available at SSRN: or

Michael C. Jensen (Contact Author)

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Harvard University - Accounting & Control Unit ( email )

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