Presentation Slides for 'The Psychological Attraction Approach to Accounting and Disclosure Policy'
59 Pages Posted: 4 Feb 2019
Date Written: November 2008
These slides summarize a paper which offers the psychological attraction approach to accounting and disclosure rules, regulation, and policy as a program for positive accounting research. We suggest that psychological forces have shaped and continue to shape rules and policies in two different ways. (1) Good Rules for Bad Users: rules and policies that provide information in a form that is useful for users who are subject to bias and cognitive processing constraints. (2) Bad Rules: superfluous or even pernicious rules and policies that result from psychological bias on the part of the 'designers' (managers, users, auditors, regulators, politicians, or voters). We offer some initial ideas about psychological sources of the use of historical costs, conservatism, aggregation, and a focus on downside outcomes in risk disclosures. We also suggest that psychological forces cause informal shifts in reporting and disclosure regulation and policy, which can exacerbate boom/bust patterns in financial markets.
The working paper version of the paper is available at https://ssrn.com/abstract=1359967.
Keywords: psychological attraction, accounting policy, disclosure, financial regulation, behavioral accounting, behavioral finance
JEL Classification: G00, G28, G38, H10, K22, M4, M44
Suggested Citation: Suggested Citation