Political Economy Framework for Analyzing Corporate Accounting Reports

Accounting Organizationsand Society,Vol 9, No 3/4, pp 207-232, 1984 0361-3682/84 $3 00+ OO
Printed m Great Britain (~) 1984 Pergamon Press Ltd
THE VALUE OF CORPORATE ACCOUNTING REPORTS:
ARGUMENTS FOR A POLITICAL ECONOMY OF ACCOUNTING*
DAVID J. COOPER
University ofEast Anglia
and
MICHAEL J. SHERER
University of Manchester
Abstract
Extstmg research on the chotce of accounting methods for corporate reports emphastzes prtvate interests
In particular, shareholders' mterestS predominate m studtes of the effects of accountmg information on
mdtvtdual users Attempts at assessing the soctai value ofaccounting reports, usmg the approach of marginal
economtcs to reformation or the analysts of economic consequences also exhtbtt, m their execuuon, a
pronounced shareholder orientation Thts paper suggests that an alternattvc approach, the Pohtmal
Economy of Accountmg, may be fa'mtful This approach seeks to understand and evaluate the functions of
accounting w,thm the context of the economtc, social and pohttcal environment m which it operates
Research w,tfun thts framework ts tdentdied as hawng normattve, descrtpttve and crmcal qualities, and the
paper concludes with some dlustrattons of potential research areas
The major objective of this paper is to outline an
alternative framework for relevant accounting
research. The intention is to reinforce recent
calls (Burchell et al., 1980; Tinker, 1980) to
understand how accounting systems operate in
their social, political and economic context in
order that "better" accounting systems might
eventually be designed. In order to set our argu-
ments for a poliucal economy of accounting in
context, the first two sections of this paper
review many of the current approaches to asses-
sing the value of corporate reports Whilst this
review might be thought to duphcate others
(eg. Gonedes & Dopuch, 1974; Foster 1980a,
Leftwich, 1980, Beaver, 1981), the synthesis
offered in this paper is quite different It is
designed to highlight the emphasis by most
accounting research on individuals (especially
shareholders) and a concern with market
equilibrium and the associated passive accep-
tance of the existmg social and political context
of corporate reporting. Implicit in our review is
a notion of social welfare that focuses on society
as an aggregate (rather than an aggregation of
individuals), an emphasis on distributive as well
as exchange (allocative) dimensions of wealth
and power and a concern with socially necessary
rather than market determined production. This
view of social welfare leads to the conclusion
that the study of the institutional context of
*Prevtous verstons of tfus paper were presented at the London School of Economics, the Umversmes of Bwmmgham, Shef-
field and Southampton and at a meetmg of the Northern Accounting Group The paper has benefited from the helpful, ffoften
crmcal, comments of Mtke Bromwtch, Anthony Hopwood, Michael Mumli~rd, Marllyn Nlemark, Jtm Ohlson, Ted O'Leary,
Tony Tmker and colleagues at the Umversmes of East Angha, Manchester and Sheffield The remamlng errors and the vtews
expressed are the responstblhty of the authors
207

208 DAVIDJ COOPER and MICHAELJ SHERER
accounting is a legitimate and necessary area of
study for accounting research The dominant
concern with shareholder interest has limited
the development of research about how
accounting systems operate and for designing
corporate accounting reports which may lead to
a fundamental improvement in social welfare 1
It is important at the outset to highlight a cru-
cml tension in this paper which arises out of our
concern to create accountings that are valuable
m society Our position, that the objectives of
and for accounting are fundamentally contested,
arises out of the recognition that any accounting
contains a representation of a specific social and
political context. Not only is accounting policy
essentially political in that it derives from the
political struggle m society as a whole but also
the outcomes of accounting pohcy are essen-
tially political in that they operate for the benefit
of some groups in society and to the detriment
of others However, it does not follow I and this
is how the tension in the paper manifests itself--
that an improvement in accounting policy can
necessarily be achieved within the accounting
domain Rather, there as the implication that the
pohtically determined nature of the value of
accounting prevents any such resolution wathm
accounting itself
Socml welfare as likely to be improved if
accounting practices are recogmsed as being
consistently partial, that the strategic outcomes
of accounting practices consistently (if not
mvarmbly) favour specific anterests in socaety
and disadvantage others Therefore, we are argu-
ing that there already exists an established, if
implicit, conceptual framework for accounting
practace. This paper offers an analysis of the
value of corporate accounting reports which
recognises both the tactical discontinuities and
varlataons in accounting policies, including the
possibility that actual policy outcomes may be
an imperfect match with the underlying inten-
tions and motivations and the strategic consen-
sus and patterns of outcomes that more or less
consistently support financial and shareholder
Interests in society In order to achieve an
improvement in accounting practices (to make
them more accountable to society m a democra-
tac way) at is important to cast asade the ideolog-
acal mask which hides the reality of accounting
research, to adentify how accounting research
justifies current political arrangements and pat-
terns of advantage and disadvantage, and how
accounting research samllarly amplies that such
arrangements and patterns are ammutable, effi-
cient and even effective That as the purpose of
this paper
The first section of this paper reviews many of
the studies which mm to assess the usefulness of
corporate accounting reports for users These
studies, because they have amphcataons merely
for the private value of informataon, provide lit-
tle guidance for the design of, and choice bet-
ween, alternatave accounting reports that are
intended to contrabute towards social welfare
In the next section some recent develop-
ments whach purport to address the question of
the social, as against the private value of corpo-
rate accounting reports are discussed These
attempts, too, provide an incomplete analysis of
the social value of accounting information Their
deficiency hes in their focus on issues of effi-
ciency (rather than effectiveness) and their
emphasis on a small set of users and the produc-
ers of accounting reports
An alternative framework for analysing the
role of accounting anformation, designated as a
pohtical economy of accounting, is presented
thereafter A pohtical economy of accounting
emphasizes the infrastructure, the fundamental
relations between class an society It recognizes
the institutional environment which supports
the existing system of corporate reporting and
subjects to critical scrutiny those assues (such as
the assumed amportance of shareholders and
securities markets) that are frequently taken for
Tlus paper adopts a conventional viewpoint m that atfocusses on corporate reports A full discussion of the value ofaccount-
mg would revolve discussion of mtm (e g household) and macro (e g national) accountmgs (Gambhng, 19"74) and why
accountmg research assumes the tmmutabthty (and deslrabthtv) of legahstlc definitions of corporations (Burchell et al.
1982)

THE VALUE OF CORPORATE ACCOUNTING REPORTS 209
granted in current accounting research. Finally
this alternative paradigm of political economy of
accounting is applied to three examples of
potential research.
PRIVATE VALUEAPPROACHES
There is a long tradition of accounting theory
being concerned with the interests of the users
of accounts (Sterling, 1972). This theoretical
concern with users has influenced practice in
the form of conceptual frameworks offered by
professional bodies (AICPA, 1973; FASB, 1978b;
Stamp, 1980; Macve, 1981). In this section we
review the user orientation in order to highhght
two features, the emphasis on shareholders and
the partial equilibrium approach adopted.
Emphasis on users in a partial equilibrium con-
text may indicate necessary conditions for the
prwate value of information. It does not provide
a sufficient basis for prescriptions about socially
desirable accounting policy and reports.
Corporate reports and individual shareholders
Accounting theory has long been concerned
with the mterests of individual private sharehol-
ders. Whilst many theories have concentrated
on aiding shareholders in decisions concerning
their income, wealth and even utility2(Edwards
& Bell, 1961; Chambers, 1966; Sterhng, 1970;
Beaver & Demski, 1974), much of the empirical
research has been limited to studies of sharehol-
der usage and understanding of accounting
reports. Shareholders usage and understanding
has been assessed in two ways; firstly, by the
application of techniques to measure readabil-
ity, and hence understanding, of accounting
reports (e.g. Smith & Smith, 1970; Still, 1972;
Haried, 1972, 1973; Adelberg, 1979); secondly,
by shareholders', or their representatives',
responses to questionnaires about their use, and
hence understanding, of financial reports (e.g.
Epstein, 1975; Lee & Tweedie, 1977, 1981;
Chang & Most, 1979; Advisory Committee on
Corporate Disclosure, 1977).
In addition to certain technical difficulties and
inconsistencies mherent in the types of empiri-
cal tests used, 3 both approaches suffer from
problems of interpretation. There is an absence
of references to any theories of how investors do
or should use accounting information. Possible
theories might include the bounded rationality
model (Clarkson, 1962), or the portfolio model
(Ball & Brown, 1969) Without such a theory
against which to evaluate the empirical findings,
it is impossible to determine whether "poor"
usage or understanding is a material factor affect-
mg individuals' actions. Other problems of
interpretation include the focussing on parts
rather than the full contents of the accounting
reports (Gonedes, 1978) and the level of self
insight required of respondents (Nisbett & Wil-
son, 1977)
A second limitation of this type of empirical
research concerns the benefits which are
expected to accrue from a concentration on the
interests of the individual shareholder. The pre-
scriptions derived from this research include
calls for accounting reports to be simplified,
accounting policy makers to concentrate on the
needs of naive investors, and the need for educa-
tion of individual shareholders in accounting
and financial matters (e.g Tweedie, 1981). A
potential consequence of these prescriptions
would be to redistribute wealth from one group
of "knowledgeable" shareholders to another
group of "naive" shareholders (Findlay, 1977).
Indeed, it is an implicit value judgement of this
type of research that such a redistribution ts a
2 This emphasis mcludes shareholder declstons to allocate what are described as "thetr" resources between firms (so-called
"financial accountmg") and to allocate resources wtthm a firm conststent wtth the maxtmlzatton of shareholder utihty (so-
called "management accountmg")
For example, Cooper et al (1977) and Brtston (1977) question the value of the Lee & Tweedie studies (1977) m part m
relation to the vahdtty of their research mstruments and tn part in relatton to thetr results The same dtfficulttes relate to thetr
later research (Lee & Tweedie, 1981 )

210 DAVIDJ COOPERand MICHAELJ SHERER
beneficial consequence in itself. In effect,
shareholders are depicted as individuals operat-
ing within an environmental vacuum and this
allows the design of corporate accounting
reports to be considered as if it were only of pri-
vate interest But the omission of any considera-
tion for the immediate environment, the capital
market, in which the shareholder class operates,
ignores wider effects which may ensue from
such prescriptions Research into shareholder
usage and understanding cannot by itself assess
whether the above re-distributiuon would lead
to a more appropriate allocation of resources
within the capital market, let alone to a higher
level of welfare for all members of the economy
As Butterworth et al. argue ( 1981, pp. 58--62),
understanding individual responses may be of
interest in contributing to a general understand-
ing of accounting (elaborating users and their
settings); but It is unlikely that individual
behaviour translates to aggregate market
responses (Schelhng, 1978)
Corporate reports and aggregate shareholder
behaviour
Research indicating capital market "effi-
ciency" (or otherwise) with respect to pub-
lished financial information might be thought to
hold promise for understanding and designing
accounting systems. By exphcitly taking account
of the effects of the aggregate behaviour of inves-
tors in a market environment, studies of the
impact of accounting information on stock mar-
ket prices might provide insights into sharehol-
der use of accounting reports and the choice
between alternative reporting methods.
Foster (1980) suggests that alternative
accounting reports may affect the cash flows of
individual firms, the covariance of cash flows of
individual firms with the market, the risk-return
characteristic of the entire capital market and
the information set used by market traders Only
the first two effects seem to have been systemat-
ically investigated Studies in the U S (Ball &
Brown, 1969) and in the U K (Firth, 1977) indi-
cate that there ~s some information content in
accounting earnings reports but this information
is not "t~mely" since the market price changes
precede publication of the accounting reports
Reviews of the empirical literature (Foster,
1978) also suggests that the stock market can
"see through" and adjust for changes in account-
ing policy which do not affect the economic pos-
ition of the reporting firm. Thus the wealth of
evidence from many of the empirical studies of
the relationship between published accounting
information and stock market prices seems to
indicate that the private shareholder cannot
make consistent abnormal gains from using such
information
However there are a number of reasons why
accounting policy makers should be wary of
using market responses to assess the private and
particularly the social value of the reports cho-
sen Firstly there are considerable problems in
defining and hence assessing the efficiency of
reformation markets (Fama, 1976; Beaver,
1981 ). A second difficulty with the efficient mar-
ket literature occurs because most existing tests
are, in fact, joint tests of the capital asset pricing
model and the efficiency of the information mar-
ket Interpretation of the results of tests is
accordingly ambiguous (Ball, 1978, Foster,
1979). Many of the above difficulties might be
removed by careful theoretical work about the
meaning of efficiency (Beaver, 1981), explicit
modelling of shareholder reaction to potential
gains (Ohlson, 1979, Patell, 1979) and more
sophisticated econometric work (e g deahng
with beta stationarity, the normality of security
returns and measures of the market portfolio)
Perhaps of more importance in relation to the
value of accounting reports is that this literature
is concerned with the efficiency of the market
for information rather than the efficiency of the
market for the securities themselves It may well
be that the empirical results indicate the private
value (or otherwise) of information (Ohlson,
1979, Patell, 1979) But only m the most
unhkely of circumstances is it possible that capi-
tal market reactions also indicate the social value
of information or have implications about the
desirability of alternative accounting measures
or disclosures Work hnklng capital market reac-
tions and the value of information (e g Beaver &
Dukes, 1972a, Ohlson, 1980) may eventually

THEVALUEOFCORPORATEACCOUNTINGREPORTS 211
provide guidance to accounting policy makers.
Under present institutional arrangements (in
particular, those that give rise to the free rider
effect, reformation asymmetry and market
incompleteness) it is however logically invalid
to suggest that capital market efficiency tests can
be used to assess the desirability of alternative
accounting measures or disclosures (Beaver and
Demski, 1974; Gonedes and Dopuch, 1974)
The desirability of alternative accountmg
measurement systems can only be assessed ffthe
objectives of the accounting funcuon within
society are made explicit (Ronen, 1979). And, if
such objectives are concerned with the effi-
ciency of resource allocation and the distribu-
tions of wealth within the economy as a whole
rather than one particular market, then capital
market research is of limited value. Focusing on
informational efficiency in the capital market
may contribute towards an efficient allocation of
capital resources from the perspective of the
shareholder class, but the resulting equilibrium
may not be efficient for other members of the
economy 4
Consideration also needs to be given to the
important but frequently neglected question of
efficiency intra and inter all the mechanisms for
allocating capital in the economy. Capital is allo-
cated by several markets, including the property
and labour markets (for human capital) as well
as by a number of publicly owned institutions
and planning authorities such as nationalized
and regulated companies, and national and local
governments.
Within this wider set of allocation
mechanisms, the choice of an accounting mea-
surement system becomes much more complex
These mechanisms are directly affected by the
accounting information produced by listed cor-
porations Many allocators of capital resources
other than the stock market also have an interest
in the choice of accounting measures and disclo-
sures. Although in the future it may be shown
that what is "good" for the stock market is also
"good" for these other allocators of capital and
hence the economy as a whole, it is a question
that is rarely addressed in the literature.
CORPORATE REPORTS AND OTHER USERS
There have been a number of attempts to
assess the use of pubhshed accounting reports
by external users other than shareholders,
including employees (e.g. Cooper & Essex,
1977; Foley & Maunders, 1977, Carlsson et al.,
1978), lenders (e.g Libby, 1979), tax authorities
(e g Mace, 1977a; Lawson, 1980), government
(eg. Enthoven, 1973; Gambling, 1974) and
researchers (e.g. Gonedes & Dopuch, 1979)
Even if homogeneity within the user groups is
assumed, ~ conflicting objectives between these
user groups may result in different preferences
for the content and form of accounting reports.
These conflicting objectives and hence prefer-
ences may be satisfied by publishing different
accounting reports directed towards each
specified group (Revsine, 1973; ASSC, 1975),
although the cost to the economy in terms of
resources used would be greater than tfonly one
set of accounts were published. The alternative
approach is to design general purpose account-
ing reports (Iilri, 1975; Mace 1977b) which
attempt to satisfy the preferences of all user
4 It is of course the case that a substantial body of recent research has been concerned with the redistribution effects of
accounting and investment decisionsbetweendifferentparties holdmgclmmson the firm Jensen &Meckhng( 1976), Myers
(1977) and Kalay(1982), for example, have shown how the capital structure ofthe firm can alter the distribution offunds
between bond and stockholders However,such work sn'nplyprovides further support for our argument that capital market
research ts concernedwith redistribution effectsonlyon a very restricted level,bond and stockholders, particularly ffthey
hold a portfolio ofassets,frequently belong to the same class Capitalmarket research demonstrates very little concernfor
other groups m society, notably workers, consumers etc
There ts little reason to assume the validity of this assumption Even the shareholder class who have a relatively well
developed market inwhich they can trade according to their preferences, mayhave imperfectlyresolved conflictsconcern-
mginformation(e g Hakansson,1981)

212 DAVIDJ COOPERandMICHAELJ SHERER
groups. The difficulty with this approach is that
any inter-user conflict over preferences must be
dealt with by a decision to choose one method
of accounting over another, i.e social choice.
However, as has been demonstrated by Arrow
(1951) for the general case and by Demski
(1973) for the case of financial reporting, it IS
logically impossible to make social choices that
are rational, reflect individual preferences and
are not dictatorial.6 In other words, the recogm-
tion, per se, of multiple external users for
accounting reports is insufficient for assessing
the overall economy-wide value of accounting
reports. It fails because the approach lacks a
theory about how these users should or do
interact with each other in the social and pohti-
cal environment. Such a theory would need to
articulate differing interests in society, their
interactions and means of resolution.
Corporate reports in a contracting context
One of the more recent developments m
theories of corporate reporting has been a shift
from an emphasis on the use of accounting m
predicting variables "of interest" to a concern
with the use of accounting in contractual
relationships between corporate stakeholders
As this development is well summarised m But-
terworth etal ( 1981 ), only the main issues will
be discussed m thts paper
Following Coase (1937) and Alchlan &
Demsetz (1972), corporations have been vie-
wed as a set of rater-related contracts between
participants In this view a significant role for
accounting reports and information is as a
monitoring device to record the behavlour of
contracting parties involved. There are several
critical issues for the value of corporate reports
Firstly what are the desired attributes of such a
monitoring system (eg Ijiri, 1975, 1981)7
Given the complex way the contractual system
adapts to "imperfections" in the monitoring sys-
tem and the difficulty of identifying an optimal
system, attention has been placed on adaptive
processes in the contractual relationship (Watts,
1977; Leftwlch, 1980, Milne & Weber, 1981) It
would appear, however, that this attention has
been stronger in asserting the existence of pro-
cesses which result in perfect adaptation rather
than in demonstrating how they operate. Finally
attention has been focused on the behaviour of
the parties m the relationship and the design of
the reward systems to share the risks and returns
derived from the interaction (Holmstrom, 1979,
Harris and Raviv, 1978)
Applications of the contracting approach with
its emphasis on agency relationships, have been
used to provide explanations for the develop-
ment of GAAP (Butterworth et al., 1981 ) and the
auditing function as mechanisms for mcreasmg
the amount of disclosure above that which man-
agers might privately wish to produce (Watts,
1977, Ng, 1978) Similarly, the continued exis-
tence of institutions such as the FASB in the U S
and the ASC in the U K., and the regulation of
accounting by government has been explained
in terms of pubhc good characteristic of
accounting reports and hence the social value
which the production of accounting reports can
confer on the economy as a whole (Benston,
1976, Findlay, 1977, Foster 1980b) The iden-
tiffed deficiencies of these explanations (e g
Leftwich, 1980) do not detract from the insight
derived from the approach
Nevertheless, there seem to be at least two
problems with th~s approach. Firstly it tends to
elevate markets to the status of an immutable
and ideal benchmark That is, markets are
treated as the standard by which other institu-
tional arrangements are to be ludged (Demsetz,
6There are limited caseswhere rational collective choices can be made about information(Cushing, 1977,Hakansson,1977,
Bromwlch, 1980) There is considerable potential in identifying and evaluating alternative institutional arrangements for
makmgsocial choices (Abdel--Khahk,1971,Beaver & Demski, 1974, Mueller, 1979) Moreover, not all economists accept
the proposition that interpersonal comparisons should not be made For example, Sen (1970) argues tor makmginterper-
sonal comparisons by imaginingoneself in the place of another and Goodln (1975), based on the ethical postulate that
everyone has an equal capacity for happmess, argues that interpersonal utility comparisons simplyrequire askingmen hox~
far along towards their "bhss points" (l e when the capacity for happiness is fullyreahsed), a change m the distribution ot
goods would take them and comparing their response~

1969). Market failures such as information asym-
metry and non-excludability may be recognised
but by assuming the perfect adaptability and
omniscience of market participants, other
institutional possibilities are dismissed
(Leftwich, 1980). There is no recognition of the
social, contrived nature of markets (White,
1981 ) or of their historical specificity (Routh,
1975). Consequently this approach almost
invariably reinforces the existing market system
or recommends reduction in intervention in
market operations so that the market can oper-
ate according to its logic. In short, the emphasis
on market efficiency which is inherent in this
approach relies on the belief (derived from mar-
ginal welfare economics), that market efficiency
is a necessary condition for social welfare
improvements. The problem with this belief,
which is considered further in the next section,
is that it is based on extremely dubious assump-
tions (Graft, 1957) and an untenable instrumen-
talist philosophical position (Tinker et al.,
1982).
The second problem with the contracting
approach is common to all the approaches dis-
cussed in this section A concern with "users" of
corporate accounts (for decision making involv-
ing prediction or for stewardship) may be able
to address issues of private value but does not
seem able to deal with the social value of these
reports. By focusing on one subset of particip-
ants in society -- active market agents -- it
ignores issues of social welfare which mcorpo-
rate the well being of all members of society. It
has been recognised that the welfare of pro-
ducer of accounting reports (Cyert & Ijiri,
1974) and corporate managers (Watts & Zim-
merman, 1978) may be affected by corporate
reports. It has also been recognised that
accounting reports may themselves influence
firms' financing and operating decisions
(Prakash & Rappaport, 1977; Heald, 1980, But-
terworth et al., 1981 ) Yet all these develop-
ments cannot avoid the problem of partial
equilibrium approaches to valuing accounting
reports, namely their failure to model the total
interaction between these reports and all mdi-
viduals and classes in society.
SOCIALVALUEAPPROACHES
It is perhaps not surprising, given the claim of
accountants to be professional (Sterling, 1974),
the increasing concern about the value for
money of accounting reports in society (Briston
& Perks, 1977), and the public concern about
the accounting profession (U.S. Senate, 1976,
Davidson, 1979), that increasing attention has
been placed on the social value of corporate
reports. In this section we review the general
equilibrium approach to the economics of infor-
mation and the analysis of economic consequ-
ences. Both approaches attempt to understand
and explain the production and use of account-
ing reports from an economy-wide perspective
and hence directly address the broader issue of
the social value of accounting information.
General equilibrium analysis
General equilibrium economic analysis
(GEEA) typically involves the analysis of infor-
mation in a market context. It aims to identify
conditions which result in economic efficiency
in the allocation of resources through time bet-
ween all market participants. In particular, GEEA
of information seeks to identify the role of infor-
mation in these allocations. Ohlson & Buckman
( 1981 ) synthesise much of the literature on the
welfare implications of public information
within the framework of marginal economics.
Whereas Hirschleifer (1971) suggested that
public information was socially useless, Ohlson
& Buckman ( 1981 ) demonstrate how this infor-
mation will affect the sharing of risks in an
economy and so has welfare implications. The
nature of these imphcations is not well specified,
however, as they depend on market arrange-
ments and the set of available resources to be
traded
The failure to produce specific welfare impli-
cations is also evident in the analysis of the pro-
duction of private information. Htrshleifer
(1971) and Demski (1974) have argued that
there are incentives for one individual to pri-
vately produce information (thereby consuming
recources) in order to make gains at the expense
of another who does not have this information.

Demski & Feltham (1976) also suggest that it
may be worthwhile for an individual to pay to
suppress information if other individuals may act
on this information in an unfavourable way
In short, then, the welfare implications of
GEEA are unclear but depend on (exogenously
determined) markets, alternatives and initial
resource endowments For instance, Hakansson
(1981) shows how groups that differ in initial
endowments (eg. wealth) will take different
positions on accounting disclosures Further,
the use of GEEA to explain the function of
accounting in society and to provide criteria for
evaluating alternative accounting systems, is
limited by its high level ofgenerahty and abstrac-
tion Wtthout detailed specification of, for exam-
ple, utility functions, cost structures of informa-
tion and production technologies, it is not possi-
ble to identify which forms of accountmg or
mstltution are efficient Further, Ohlson &
Buckman (1980) indicate the senstttvity of the
conclusions of the analysis to changes in the
attrtbutes of the model of the economy. For
instance, they suggest that the conclusions
derived from a simple (analytically tractable)
model may not apply for more complex models
(which includes such "complexities" as three
time periods, heterogeneous expectations and
endogeneous information production).
Two further hmitations of GEEA relate to the
use of marginalist (neo-classical) economics as
the theoretical basts of the analysts The first gen-
eral limitation relates to the exclusion of effec-
tiveness considerations The unwillingness of
marginahst economics to enquire mto the fac-
tors that shape preferences and motivate market
demands ( and the corollary of failing to consider
demands which are not supported by resources
or are not expressed in a market) means that
GEEA fails to distinguish between efficiency, the
relationship between resources used and out-
puts achieved, and effectiveness, the relation-
ship between the outputs achieved and the satis-
faction of society's needs and expectations (Pfef-
fer & Salancik, 1978)7 Whilst recent reviews
demonstrate the theoretical disarray of much of
the social science literature which addresses
issues of effectiveness (particularly that relating
to organizations -- cf. Kanter and Brmkerhoff,
1981, Goodman & Pennings, 1977) tt is
nonetheless evident that pohtical issues cannot
be divorced from economic analysis in relation
to social choices The fundamental issues
revolve around power and whose mterests pre-
dominate in society In order to address ques-
tions of effectiveness m relation to accounting
reports, it is necessary to make explicit a social
welfare function which enables trade-offs to be
made between individuals and classes of mdl-
vtduals m society This ts not to say that it is the
responstbility of an accounting researcher (or
accountant) to produce a social welfare func-
tion, such functtons should be articulated in the
political arena However, it is the case that an
analysis by an accounting researcher (or
accountant) that fails to incorporate that arena
has little credibility when discussing values and
'better" choices. Because GEEA emphasizes the
slgnLficance of mdividuals and avoids making
mter-personal comparisons of utility, tt ts not an
appropriate method of analysts for facilitating
the choice between alternative accounting mea-
surement systems which have differmg distribu-
tion effects in terms of wealth and/or welfare
between classes in the economy
The second hmttation of marginal economic
theory for guidance about destgning accounting
systems relates to what mtght be termed its
" Of course, efficiency is itselfa problematic concept Its use by economists is ambiguous (Hall and Wmsten, 1959 ), the con-
cept is socially constructed (influencing and being influenced by ideological preferences) and it is given different emphases
m different historical situations (e g Haber, 1964, Seale, 1971) Hence, its measurement is an overtly value laden political
activity-- it ts not a technical task Since any measure ofefficiencyrequires a method ofvaluing inputs and outputs, and given
that any valuation system is value laden (Tinker et al, 1982), the measurement of efficiency inevitably depends upon the
prevalhng power and interests tn society, vlz how "things" (men women, land, capital, air, water, freedom, democracy etc }
are valued Moreover, although it can be ufferred that effectiveness is a h~gher level order than efficient} effectiveness/cffi-
c~enc~will always need to be traded offagainst equality if,as we argue, interpersonal comparisons are made (Goodm, 19"5 )

micro foundations Marginal economics implies
that individual preferences for accounting infor-
mation should be treated as exogenous wants
although it has been suggested that such prefer-
ences may be influenced by learning through
action (Sterling, 1972, March, 1978; Einhorn &
Hogarth, 1981). Similarly, accounting resear-
chers might also question the normative and
descriptive validity of the notion of rational
choice assumed by marginal economic theory.
That is to say, individuals may not only be unable
to behave consistently (Tversky and Kahneman,
1974) but they may also wish not to do so
(Slovic & Tversky, 1974). Thus, some of the
seemmgly innocuous assumptions about
rational choice that form the basis of much of the
public choice literature (including Arrow's
Impossibility theorem) may indeed be con-
tested
These observauons notwithstanding, it seems
probable that developments in GEEA, as they
incorporate more "realistic" models of the
economy, will not only produce more robust
analytical welfare implications relating to the
efficiency of resource allocation in a capitalist
economy but also will provide some insight into
the roles of both pubhcly and prwately pro-
duced information in this process However,
such implications and insights will be dependent
on the essentially value laden conceptualisation
of the variables analysed Differing views of such
variables as eft]clency, effectiveness and infor-
mation would lead to a range of general
economic equilibrium analyses, each offering
differing implications and interpretations. There
are alternative approaches to the value of corpo-
rate accounting reports which offer a better
basis for informed debate and discourse than the
currently dommant one of a single analytical
view derived from marginal economics and a
particular conceptualisation of the variables
Economic consequences analysis
Economic consequences analysis (ECA) has
recently emerged as an alternative approach for
understanding and valuing the role of account-
ing reports in a broader societal context In con-
trast to the largely abstract approach of GEEA,
the ECA literature tends to be empirical and
seems to have the potential for assessing a wider
range of effects of changes in the accounting
measurement system and hence for understand-
ing the social role of corporate accounting
reports (FASB, 1978a) Any changes to the status
quo can, it is suggested, be assessed in terms of
the "impact of accounting reports on the deci-
sion making behaviour of business, government,
unions, investors and creditors" (Zeff, 1978,
p.56). It seems unfortunate, however, that the
"rise of economic consequences" (Zeff, 1978)
seems to have been motivated, at least in the
United States, by a desire by large corporations
to counter attempts to change the existing
reporting systems and levels of disclosure To
date, it would seem that accounting researchers
have generally reiterated the complaints of
investors and businessmen about the consequ-
ences of changes in required accounting prac-
tice (AAA, 1978).
As the 1980 Supplement to the Journal of
Accounting Research illustrates, studies using
ECA have almost invariably evaluated the con-
sequences of accounting reports solely in terms
of the behaviour and interest of the shareholder
and/or corporate manager class (Selto &
Neumann, 1981 ). Many of the empirical studies
have attempted to assess the stock market reac-
tion to changes in the content of published
accounting information For example, Gril~n
(1978) suggested that the market reaction to
SFAS 8 (Translation of Foreign Currency Trans-
actions) was a consequence of the additional
currency hedging which management was likely
to undertake to minimize the fluctuations in cor-
porate earnings. Similarly, the possibility that
management of "full-cost" oil and gas corpora-
ttons would reduce exploration activity as a con-
sequence of a switch to "successful efforts"
accounting under SFAS 19 may have explained
the market reaction to such corporations (Lev,
1979). But as Foster (1980a) has observed, the
inconsistency of the results m the numerous
tests of the market reaction to SFAS 19 is indica-
tive of a general failure in such tests to specify a
theory of expected effects (and thence identify
necessary control variables). Vigeland (1977)

216 DAVIDJ COOPERand MICHAELJSHERER
found that the stock market did not react to SFAS
2 This result may be interpreted as indicating
that investors' expectations about manage-
ments' R&D decisions were unaffected by
accounting standards. Two disclosure require-
ments enacted by the SEC have also been
evaluated in terms of stock market impact: line
of business (segmented) disclosure (Horwitz &
Kolodny, 1977; Collins & Dent, 1979), and
replacement cost disclosures (Beaver et al,
1980, Ro, 1980). Similarly, Morris (1975) found
that the U K. stock market found little new infor-
mation in early inflation adjusted corporate
reports. All these studies have relied on the effi-
cient markets paradigm in order to measure any
impact of accounting changes on market price
Even allowing for the criticisms, discussed previ-
ously in the first section of the paper, which this
paradigm has recently encountered and for the
possibility that such studies can be interpreted
as negating the efficient market hypothesis itself
(Lev, 1979, p 501 ), the concentration on stock
market reaction hardly fulfills the expectations
established for the ECA approach by May & Sun-
dcm (1976) who had emphasised the impor-
tance of obtaining evidence of the total
economy-wide impact of changes in published
accounting information.
There have also been a few studies, within the
ECA framework, which have directly investi-
gated the impact of changes in accounting
reports on corporate management decisions.
Dukes et al (1980) and Horwitz & Holodny
(1980) investigated the impact of SFAS 2 on cor-
porate R&D expenditures The inconsistent
results of these studies may be due to differmg
samples but even when a reduction m R&D
expenditure occured, these studies are unable
to detect whether there was a change in the
nature and distribution of R&D throughout the
economy In short, the focus is on firm-level
effects and not economy-wide effects. Similarly,
Wilner's experiments (1982), albeit in a laborat-
ory, supported earlier surveys which suggested
that SFAS 8 affected managers' exchange risk
decisions And Biddle (1980) found that the
LIFO-FIFO choice affected the size of inven-
tories held by corporations The theoretical jus-
tification for the effects identified in these
studies tends to be based on some version of
agency theory (Jensen & Meckling, 1976; Watts,
1977). This theory suggests that corporate man-
agers will have an incentive, based either on
direct changes in expected corporate cash flows
(e g. cost of capital, tax, information processing,
political or production costs) or on changes to
the managers' own compensation systems, to
adjust their behaviour as a result of changes in
accounting methods
The relevance of these studies to an assess-
ment of the social value of accounting reports
can be questioned on a number of grounds.
Firstly, there has been very little modelling of
the process by which managers respond to
accounting changes s The outputs, managerial
attitudes and actions, are observed in association
wtth the inputs, the change in accounting
reports, but no evidence is presented concern-
ing the way managers actually arrive at their
attitudes or actions Thus, the whole issue of
why managers act, or have the attitudes they do,
is subsumed by the rationality assumptions in
agency theory 9Alternative explanations such as
the nature of the information itself(Kelly-New-
ton, 1980) or the role of corporate personality
(Sorter & Becker, 1964) are not explicitly consi-
dered Secondly, these studies have been unable
to distinguish between operating decisions
brought about by new accounting standards and
operating decisions which would still have been
Btddle(1980) has made a recent attempt to model this process but although he found cash flowincentives haveconsider-
able power tn explammgvoluntary LIFO-FIFOchoices, he alsofound other umdenttfied factors were important
9 We may challenge the descrtptwe and normative vahdtty of the notion of raUonahty mherent m agency theory Social
psychologistshaveindicated the descriptive hmltatlons ofthe axiomswhich formthe bas~softhe economic theory ofchoice
We alsodoubt the deslrabnty of destgmng accounting reports predicated on a model of individualeconomic serfinterest
These issuesaside,the agencytheory hterature seems to view rattonahty inconsistently It assumesthat individualmanagers
and the stock market have incentives not to interpret accountmg numbers at their facevalue but that "bureaucra~Aes"such

taking because of changes in other factors (Ball,
1980).
More fundamentally, studies adopting the
ECA approach have focused their attention on a
very limited subset of the total economy,
namely, the impact on the shareholder or man-
ager class. The effects of accounting reports
directly on other users, e.g governments and
unions, and indirectly on "non-users", e.g. con-
sumers, employees and taxpayers, have been
ignored The basis of such a decision can, at best
be that any such effects are either secondary
and/or lacking in economic significance Thus,
these studies have made an implicit value state-
ment that the needs of the shareholder and man-
ager class are of primary importance and that
concentration on those needs is sufficient for an
understanding of the role of accounting reports
in society. Unless the insignificanceof the effects
on other users and "non-users" is demonstrated
rather than merely assumed, the conclusion
from this research cannot be generalised for the
economy as a whole and these studies are insuffi-
oent for making accounting prescriptions
intended to improve overall social welfare.
In addition, ECA research has been at the level
of the single enterprise so that the possibility of
substitution effects (e.g. the re-distribution of
research expenditure from one set of enter-
prises to another) has been ignored. Macro-
economic, social and political consequences of
corporate reports are hinted at rather than inves-
tigated The emphasis on the legalistic defini-
tions of single corporations (as compared, for
example, with production units or regional
enterprises) means that both micro and macro
effects of accounttng policies cannot be iden-
tified with any clarity. Despite its promise, ECA
has at present adopted a partial equilibrium
ortentation to the consequences of corporate
accounting reports
Finally, it should be noted that many of these
empirical studies under the ECA approach have
been funded by the SEC and the FASB. The
acceptance of a partial equilibrium orientation
by these institutionsmay suggest either that they
have failed to operate in the interest of society as
a whole, by whom they are financially sup-
ported, or that they too hold the belief that soci-
ety's interests are identical to those of the
shareholder and manager class. If research into
the social value of accounting reports is to be
taken seriously, then we need to consider not
only alternative methodological frameworks but
also alternative institutions for supporting those
frameworks. These are the main issues we dis-
cuss in the next section
A POLITICAL ECONOMY APPROACH
In the previous two sections we have critically
reviewed the prevailing approaches adopted m
the literature for evaluating the form and con-
tent of alternative corporate accounting reports.
Our criticisms have been directed towards the
partial equilibrium analysis of these approaches
and the bias which they exhibit in favour of the
shareholder and manager classes in society. The
remainder of the paper contains our arguments
for an alternative approach which explicitly
attempts to counter-balance this bias. In this way
we hope to encourage research which looks at
the accounting functions within the broader
structural and institutional environment tn
which it operates. To distinguish this approach
from those above, we shall describe it as a Politi-
cal Economy of Accounting (PEA) (Tinker,
1980).
The study of accounting would benefit from
an approach that emphasizes institutional fea-
tures and influences, a trans-disciplinary mode
as the government or trade unionsdo not In other words, agencytheory seems to suggestthat mdtvtdualmanagersand the
stock market can see behind the arbttrary conventions of accountmg measurement but other potenttal users are fooled by
them However, managersare not alwaysqutck to see the consequences of changes m accountmg standards, as when UK.
corporate managersdid not immedtatelyappreciate that the proposal ofthe lnflattonAccountingCommtttee(1975)forcur-
rent cost accounting would not produce anytmmedtatetax benefitswhich was a majorreasonfor thetr imtialsupport forthe
proposals (Brennan, 1979) Similarly,governments can adjust conventtonal accounts to produce both replacement cost and
fundsflowdata for nattonal mcome accounts (Maurtce, 1968)

of investigation and the study of processes mov-
ing towards dynamic equilibria Although there
may be many different variants of political
economy (Frey, 1978), most emphasize the
inter-relationship between political and
economic forces in society In relation to an
assessment of the value of corporate accounting
reports, a PEA suggests that any such value is
likely to be contested as it is shaped in (and
shapes) both the political and economic arenas
Features of a political economy approach
The PEA we are emphasizing is characterized
by three features. The study of accounting
should recognize power and conflict m society,
and consequently should focus on the effects of
accounting reports on the distribution of
income, wealth and power in society t0 Lowe &
Tinker (1977) argue that most accounting
research is based on a pluralist conception of
society This view assumes that power is widely
diffused and that society ts composed of indi-
viduals whose preferences are to predominate in
social choices and with no individual able to
consistently influence that society (or the
accounting function therein) As Lowe & Tinker
(1977) indicate, such a pluralist view seems to
ignore a substantial volume of evidence that pre-
sents alternative views of society One alterna-
tive view suggests that the mass of people in soc-
iety are controlled by a well defined elite (e.g
Stanworth & Giddens, 1974) A second alterna-
tive view is that there ts a continuing conflict in
society between essentially antagonistic classes
(eg Mihband, 1969; Westegaard & Resler,
1975)
By bringing power to the forefront ofaccount-
mg analysts, we suggest that these alternative
views of society be taken seriously by account-
ing researchers Instead of assuming a basic har-
mony of interests in society which permits an
unproblcmatic view of the social value of
accounting reports, a political economy of
accounting would treat value as essentially con-
tested, with accounting reports operating in
specific interests (e g. of elites or classes). The
way these reports might operate include mystifi-
cation and legitimation (Burchell et al., 1980)
Hoogvelt & Tinkler (1978) and Tinker (1980)
illustrate these tendencies They illustrate how
the distribution of income for a specific enter-
prise (a multinational) may be determined by
the distribution of power amongst its particip-
ants rather than by any economic imperative
Their work also implies that the classifications
used in corporate accounting reports focus
attention away from an account of the
beneficteries from the enterprise More gener-
ally, Tinker et aL (1982) indicate how account-
mg theories themselves are a produce of the soc-
Iety m which they operate and cannot be
regarded, except in the most trivial sense, as
neutral; they serve specific interests
A second feature of the PEA which we wish to
emphasise is the specific historical and institu-
tional environment of the society in which it
operates Most accounting research treats the
economy as ff it were made up of price taking
units with constant returns to scale, instantane-
ously moving from one equihbrium to another
equilibrium on the Paretian frontier There is lit-
tle recognition that the economy is dominated
by large corporations, often operating in
ohgopolistlc or monopolistic markets (Prats,
1976, Hannah & Kay, 1977) Disequilibrium is a
standard feature of the economy (Kornai, 1971 )
And the state, far from being the passive reposit-
ory of social welfare, is actively involved in man-
aging the economy The role of the state ts
indeed central to an understanding of account-
ing policy, for the latter is strongly interrelated
with at least one obvious element of state activ-
ity, namely taxation With the increasingly appa-
rent "fiscal crisis" where governments cannot
fund their level of spending, the contradictory.
position of the state in acting on behalf of large
~oThe concept of power ts of course, contested We are referring tn the abthty of a group to mtlucnce the allocation ot
resources and indeed the definitionofwhat constitutes aresource andanappropriate allocation Thlsvlewofpower tsrelated
rather more to Lukes'thlrd dlmenslon ofpower (Lukes, 1974) and to the artl(.ulatl()nof interests m soclet~ (Benton, 1981)
It has httle relationship with the individualistic,one-dimensional views of power (Wrong. 19"79)wh~(.hinfluence much
accounting research (e g Brown, 198l, Newman, 1981,Hope &Gray, 1982)

firms and commercial interests whilst at the
same time attempting to preserve social har-
mony and its own legitimacy has become
increasingly apparent (O'Connor, 1973, Block,
1981).
Several accounting researchers (e.g. Zeff,
1972; Merino & Neimark, 1982) have recog-
nized the significance of an historical focus in
order to understand the changing roles of
accounting practice and by implication the his-
torical specificity of an assessment of the social
value of these roles. Similarly, there has been a
gradual recognition of the significance of gov-
ernment and the state in the determination of
accounting reports and policies (e.g. Sterling,
1974; Shakleton, 1977). This recognition, how-
ever, has gone little further than attempts to
maintain private control of accounting in the
face of what is seen as interference by an other-
wise neutral government Notable exceptions
are the analyses by Hopwood et al. (1979) and
Burchell et al. (1981) which suggest that the
state -- through its involvement in the administ-
ration of war, the management of national
economic planning and concerns for greater
accountability (often in the context of exten-
sions to economic democracy) -- has been
actively involved in the development of
accounting practices
The third element of a PEA of accounting
involves the adoption of a more emancipated
view of human motivation and the role of
accounting in society, that is, a view that
acknowledges the potential of people (and
accounting) to change and reflect differing
interests and concerns. It has been a tenet of
conventional economics and accounting that
the factors that shape human preferences and
motivations cannot be investigated Con-
sequently it has not seemed possible (or desira-
ble) to distinguish the cause and nature of
"genuine" needs and those which result from
demonstration, ostentation, advertising and
other learnt factors (Hollis & Nell, 1975) To the
extent that people are concerned solely with
economic self interest, this self-interest may be
seen as a consequence of the way society is
orgamzed rather than an unalterable characteris-
tic of people (Marcuse, 1964) A concern for a
more emancipated view of human motivation
would recognise the possibility, for example,
that accounting practices may contribute to alie-
nation at work and to the pursuit of private
interest (Cherns, 1978). For instance, ignoring
externalities (social costs) when "accounting"
for corporate activities may encourage self-
interest at the expense of social interests.
Contrary to an emancipated conception of the
role of accounting in society, accounting prac-
tice is frequently viewed as a passive function
(e g Peasnell, 1978) which responds to, rather
than changes, the environment in which it oper-
ates. In the same way as the medical profession
may have a legitimate concern with housing,
social conditions and public health (eg the
quality of sewerage and water supplies) in order
to carry out a role of say, improving the health of
the community, so the accounting profession
may have legitimate concerns in relation to its
immediate environment (eg. the commercial
and financial sectors of the economy) Attempts
to resolve technical Issues without considera-
tion of this environment may result in an imper-
fect and incomplete resolution due to the accep-
tance of current institutions and practices. One
of the strengths of the Corporate Reports (ASSC,
1975) was that it saw the need to change legal
definitions of accountability if accounting
reports are to have value in improving
stewardship and thereby social welfare
Imperatives of a political economy approach
The characteristics of a PEA approach may be
encapsulated in three imperatives: be norma-
tive, be descriptive and be critical. These
imperatives are intended to be more radical than
the usual exhortations of this kind. Incorporat-
ing all three imperatives may be a necessary
(though not sufficient) condition for "valuable"
accounting research.
Be explicitly normative Accounting resear-
chers should be explicit about the normative
elements of any framework adopted by them All
research is normative in the sense that it con-
tains the researcher's value judgements about
how society should be organized (Robinson,

1964; Mattesich, 1978) However, very few
accounting researchers make their value judge-
ments explicit
For example, Tinker (1977) draws attention
to a critical issue that is frequently ignored in the
allegedly neutral concern with predictive abil-
ity any choice of"objects of prediction" reflects
the researcher's values about the importance
and desirability of predicting cash flows, sys-
tematic risk, earnings etc Similarly, we have
drawn attention to the implicit value judge-
ments inherent in partial equilibrium analyses of
the value of accounting reports Concern for the
private investor, for capital market agents, or for
corporate management is in effect a normative
statement that the interest of these particular
parties should predominate in the choice of an
accounting system Yet the relationship bet-
ween these interests and other interests in soci-
ety is rarely articulated, let alone justified.
In contrast to our position, Watts & Zimmer-
man (1979) have argued that normative
theories are inappropriate in scientific research
because they are merely a cloak for furthering
self-interest Even ignoring the logical and
philosophical problems of their argument (see
Chalmers, 1978, Christenson, 1981, Lowe et al.,
forthcoming) their espousal of the positivist
agency theory means that they have themselves
taken a normative position However, their nor-
mative stance, that the welfare of the sharehol-
der class (the principals) is paramount, is not
explicitly exposed or evaluated
The suggcsUon that accounting researchers
should be explicit about the normative elements
of their research is intended to facifitate coher-
ence in accounting research and to encourage
researchers to identify the purposes of their
activities. Our suggestion for making such values
explicit would serve two broad purposes
Firstly, it would aid the identification and evalua-
tion of indiwdual pieces of research within the
context of a particular paradigm (Kuhn, 1970)
or research programme (Lakatos, 1970) Thus,
research could be classified into one of the exist-
ing paradigms, for example ECA, and assessed by
reference to the unrefuted theories of that
paradigm
Secondly, explicit statements about the value
judgements of the researchers would facilitate
an evaluation of the alternative paradigms them-
selves. Lakatos (1978) provides a set of criteria
for distinguishing between degenerate and prog-
ressive scientific research programs Although
such distinctions vary over time, it should be
recognised that publicly supported institutions,
such as the SSRC in the U.K and the FASB in the
U.S., make choices between theories each and
ever}" time they allocate funds for particular pro-
jects However choice between theories does
not necessarily imply choice between research
programmes. An essential clement of the argu-
ment in this paper is that one programme has
been dominant. By encouraging a variety of
research programmes with explicit normative
elements, publically funded institutions and
others such as consumer associations, trade
unions and environmental groups may recog-
nise the uses and limitations of particular "ac-
countings" Further, choice of accounting
pohcies will be recognlsed as a social one which
is the legitimate concern of all groups in society
Debate about the value of accounting can then
be recognised as being in the political arena
rather than the private concern of accountants
and the financial sector of the economy (U S.
Senate, 1976).
Be descriptive Recently, there have been
numerous calls for 'positive' research in
accounting (eg Watts & Zimmerman, 1978)
To the extent that these argue for a value-free
approach to accounting research, wc have indi-
cated above the impossibility as well as undesira-
bility of this approach to research To the extent
that they argue for increased description of'ac-
counting in action', that is the effects of account-
ing on society (and vice versa) and for increased
understanding of the relationships between
accounting, the accounting profession and the
institutions in society, then we are in sympathy
with them
Above it was argued that much of accounting
research which utihses rigorous marginal
economic analysis to make statements about the
nature and value of accounting is unable, due to

the lack of descriptive validity, to provide an
adequate basis for understanding or designing
accounting systems Accounting is essentially
practical, it is executed by and it influences the
behaviour of individuals and classes inside and
outside organizations To understand the prac-
tice of accounting, or accounting in action, we
suggest more attention be given to descriptive
studies in accounting research. Such studies
would attempt to describe and interpret the
behavlour of accounting and accountants in the
context of the institutions, social and political
structures and cultural values of the society in
which they are historically located
The descriptive imperative is not intended to
suggest that descripttons of accounting (or
accounting descriptions themselves) are value
free or objective The interrelationship between
facts and interpretations has been acknow-
ledged even by spokesmen of the accounting
profession (Carmichael, 1979). Similarly, all
descriptions are "structured by the conceputal
framework that is applied as well as by the tech-
nical instruments used in their production" (Ir-
vine, etal, 1979, p 5)
It is important to go beyond description based
on "commonsense" views of the world and
actors' own definitions of their realities Whilst
study of these views may yield much of interest
about the taken for granted view of the world
(e g. Tomkins & Groves, 1983), there is a ten-
dency for such studies to ratlonalise the ideol-
ogy of the status quo. That is, the conceptual
framework implicit in commonsense views IS
frequently little more than rationalisation for the
established view. This argument is illustrated by
Kuhn (1970) in his analysis of changes in scien-
tific theories. Likewise a political economy of
accounting needs to be based on descriptions of
accounting practice based on alternative
theories of soctety and accounting's role therin.
For example the recent analysis by Jones ( 1981 )
of the relationship between the British accoun-
tancy profession and the economy uncritically
utilises the arguments and theories of the
accountancy profession itself to explain changes
in the profession's organisation and structure.
Such commonsense descriptions can be com-
pared with Larson's (1977) analysis of the rise of
professionalism (in general) Rather than
describing what a profession wishes (or pre-
tends) to be, Larson aims to elucidate what a pro-
fession is through a description of the changing
institutional structure that supports (to greater
or lesser degrees) the functions of a profession.
Be critical. The final exhortation concerns the
attitude of the researcher, him or herself. In
order to develop and evaluate alternative
paradigms and methodologies, the researcher
needs to exhibit critical awareness, not only of
the extant research but also of the relationship
between the supply of accounting research and
the demand for it by various interests, including
the profession, managers and the funding institu-
tions (Watts & Zimmerman, 1979). This need
for a critical attitude has already been illustrated
m the discussion of the descriptive imperative.
The criterion of critical awareness goes
beyond conventional notions of researcher
indepenence; it requires that the researcher
considers the kinds of accounting which may be
worthwhile outside the context of the existing
environment as well as the process which led to
and may lead from that context (Habermas,
1978). For example Bryer et aL (1981) show
that British Steel's plans, whilst they can be
analysed in terms of unrealistic expectations and
dubious accounting practices, can only be
understood in the context of the organisation
and history of the industry lteslf. The terms of
compensation to the former owners when the
industry was nationalised were such that mas-
sive interest payments, unrelated to, and unsup-
portable by, the assets acquired, resulted in the
desperate plans undertaken Similarly, Tinker et
al. (1982) argue that concepts of value are
socially determined and that alternative concep-
tions of value are required which do not uncriti-
cally accept that market exchanges are an
adequate indicator of social value In developing
counter-information (eg Ridgers, 1979) and
social accounting (e g. Epstein et al., 1976; Les-
sem, 1977) critical accounting research would
suggest the need to go beyond current
economic arrangements (e.g. markets) and

222 DAVIDJ COOPERand M1CHAELJSHERER
dominant theories (e.g. marginalism) Such
research might develop alternative conceptions
of value including those based on socially neces-
sary production, that ts valuing products accord-
ing to their ability to satisfy the needs of the com-
munity as articulated through democratic rather
than market processes
As a relauvely immature subject, it is perhaps
not surprising that accounting research has not
been as reflective as some of the other social sci-
ences (e g. the critique of conventional orgamsa-
tion theory found in Burrell & Morgan, 1979). A
critical approach to accounting, however, starts
from the premise that problems in accountmg
are potentially reflections of problems in and of
society and accordingly that the latter should be
critically analysed Thus if a major problem in
accounting is identified, say as its overwhelming
orientation to investors, then a crmcal perspec-
tive would suggest that thxs problem is a reflec-
tion of society's orientation and to change
accounting practice requires both social aware-
ness (e g. identificationof alternative "accounts"
and the roles of accounting in society) and ulti-
mately social change.
Whether critical theory can m practice be
applied to accounting research (for recent
attempts see Puxty et al, 1980 and Chua et aL,
1981 ) depends on whether researchers can free
themselves from the attitudes and orientations
which result from their social and educational
training and which are reinforced by the beliefs
of the accounting profession and the business
community For this sociahzation process has
produced accounting researchers who may
exhibit subconscious bias in the definition of the
problem set of accounting and the choice of
theories to analyze and solve these problems
The criterion of critical awareness revolves rec-
ognizing the contested nature of the problem set
and theories and demystifying the ideological
character of those theories
The exhortation to be critical, then, goes
beyond the concerns for independence in the
face of increasing professional pressures for "re-
levant and useful" accounting research It also
goes beyond concerns to critically assess the
claims by corporate managers that changes m
accounting reports will have undesirable con-
sequences on the corporate sector and the pub-
lic interest It involves a recognition of the con-
tested nature of the accounting problematic and
indeed the concept of what is or is not in the
public interest
SUGGESTIONS FOR RESEARCH WITHIN A
PEA FRAMEWORK
A Political Economy of Accounting (PEA) is
thus a normative, descriptive and critical
approach to accounting research. It provides a
broader, more hohstlc, framework for analyzing
and understanding the value of accounting
reports within the economy as a whole A PEA
approach attempts to explicate and interpret the
role of accounting reports in the distribution of
income, wealth and power in society In so
doing, a PEA approach models the institutional
structure of society that helps fashion this role
and provides a framework for examining novel
sets of institutions, accountings and accounting
reports This section suggests a number of
potential research studies which could be
undertaken within a PEA approach At this stage
in the development of a PEA approach, it would
be arrogant to delineate these studies as a cohe-
rent programme of research, rather they should
be considered as skeletal illustrations of the type
of research wfuch may eventually induce such a
programme
Accounting and social welfare
Accounting research increasingly argues that
all accounting policy decisions, including the
choice of the appropriate accounting measure-
ment system, must be made by reference to the
contribution each alternative makes to overall
social welfare (Beaver & Demskl, 1974) A malor
issue is then seen as revolving around the defini-
tion and measurement of social welfare Whilst
the social role of accounting has been recog-
nised for some time (e.g. Scott, 1931 ) we have
already argued in this paper that it is the pluralist
version of social welfare which dominates
accounting research However, this perspective

THEVALUEOF CORPORATEACCOUNTINGREPORTS 223
precludes a number of potentially useful
research areas which do not treat preferences as
exogenous variables For example, research
which attempts to mvestigate how accounting
reports affect and modify preferences or how
power is used to prevent accounting alternatives
from being discussed by policy makers, might
require alternattve conceptualisations of social
welfare, based, for example, on economic and
social classes, or on characteristics of society as
a whole rather than on an aggregation of indi-
vidual welfare.
Such conceptualisations might suggest that all
notions of social welfare are essentially con-
tested and political In that sense accounting
researchers may have to decide in a more
explictt way which interests they intend to
serve The position argued in this paper ts that
accounting (and accountmg research) currently
serves very narrow interests 1e those related to
the shareholder and financial class An alterna-
tive conceptuallsation of social welfare might
take an aggregate view of society, focussing on
social indicators of welfare e g levels of and
changes in national income, adult hteracy, dis-
tributton of wealth, mortahty statistics etc ~j
Wtth a conceptualisation of aggregate soctal wel-
fare, the value of corporate reports mtght lie in
their contribution to the construction of aggre-
gate economy statistics and to nattonal planning
In addition, the way social welfare is measured
interacts with the researcher's conceptualiza-
tton of social welfare. Accounting researchers
shoud recognize, for example, that m choosing
money values to measure the social costs and
benefits of alternative accounting systems, they
are accepting that the maximization of wealth is
an appropriate proxy for social welfare There is
mcreasing doubt about the wisdom of such a
choice, partly due to the exclusion of "free
goods" in such a calculus (eg Schumacher,
1974) However, research could be undertaken
to assess the value of alternative accounting sys-
tems in terms of other parameters such as
employment, health or self-esteem, each of
which may be equally appropriate candidates for
social welfare proxies. An example of this kind of
social accounting is the study by Rowthorn &
Ward (1979) of the effects on a number of
macro variables of the closure of a steel plant in
the U.K. Such exercises utilizing a multiplicity of
measures of soctal welfare, suggest that account-
mg researchers may need to work closely with
other soctal scientists, including sociologists,
psychologists and economists. Note, however,
we are not advocating conventional social
accounting or cost benefit analysis where
incommensurate dimensions are compressed
mto the single dimension of money and valued
in relation to market prices
Accounting as ideology
In situations where there ~s a conflict about
the objectives of social activity, Burchell et al.
(1980) suggest that accounting information has
an tdeological function in that it is used to
legitimize particular activities or rationahze past
behaviour Research into this ideological role
may take the form of investigating which
interests in the economy are bolstered and
which interests are undermined by the account-
lng measurement system currently used in cor-
porate reports
One example of this type of research would be
an exammatton of the role of a conceptual
framework in the accounting policy making pro-
cess (Burchell et al., 1982) Rule making bodtes
may more easily justify their actions if they can
be said to be the outcome of "rational" proce-
dures and analysts (Pfeffer & Salancik, 1974;
Meyer & Rowan+ 1977) Whether the search for
objectives and scientific bases for dectsion mak-
ing by the SEC, FASB and ASC reflects a similar
use of ritualistic ceremonies to legitimize their
~ The suggested use of societal mdlcators should not be t',tkento imply that such mdtcators are unambtguous or value free
Manyof the concerns expressed about effictencyand effectiveness (see footnote 7) also apply here The issue ofwhat is, and
what is not, included m social and economtc statlsttcs ts a well known problem m social and economtc research Stmtlarly,
the categories used to classifydata, for example m the stattsttcs on money supply, cause of death and dlstnbutton ofwealth,
all presuppnse a parttcular theory of the economy or society These tssues have been recogmsed for a long-ttme, recent dts-
cusstons can be found in Hmdess ( 1973)+Irvme et al. (1979) and Tomhnson, ( 1981 )

activies and conceal contested and inconsistent
choices would, therefore, be a worthwhile piece
of research within a PEA framework (Dopuch &
Sunder, 1980; Boland, 1982)
Another area of research from this ideological
perspective would be a consideration of how
accounting reports are used in situations of
economic and political conflict. "Many of the
reports by Counter Information Services can be
seen as attempts to provide information
resources for workers engaged in specific strug-
gles, and to expose the nature of the social and
economic system which is the cause and content
of these struggles" (Ridgers, 1979, p.326)
Within the context of collective bargaining
Sherer et aL (1981) suggest that managers are
more likely to disclose accounting information
to unions when it provides evidence of their ina-
bility to pay higher wages In contrast, when the
conventional accounting numbers do not pre-
sent a favourable position from management's
perspective, i e the company appears to have
the ability to pay higher wages, managers either
refuse to disclose accounting information or
emphasize the limitations of existing accounting
conventions
Solomons (1978) has argued that to be useful
accounting should be as objective as cartog-
raphy. However, it is unlikely that any method of
accounting can be neutral with regard to its
effects on behavlour and hence on the distribu-
tion of income and wealth in the economy
Therefore, the mandated use of one accounting
measurement system inevitably helps to sustain
the power of one set of interests over others in
society Research studies of accounting as ideol-
ogy would illuminate our understanding of the
relationships between accounting and the dis-
tribution of resources and power in society and
might suggest types of accounting systems
which would be appropriate if the structure of
society was changed.
Identification of accounting problems
The accounting profession and researchers
frequently justify their choice of the accounting
problem to bc investigated by reference to the
public interest However, the meaning of the
phrase "the public interest" and the influences
on the choice of accounting problems are them-
selves areas worthy of research Gouldner
(1970) argues that the social sciences have
tended to be greatly influenced by the demands
of their clients in defining relevant research
Johnson (1972) has suggested that the clients of
accounting are the industrial and commercial
corporations and that the accounting profession
itself operates under corporate patronage Sev-
eral studies also suggest that there is a common-
ality of interest between investors, multinational
corporations and large multinational audit firms
(e.g Rockness & Nicolai, 1977, US Senate,
1976, Hussein & Ketz, 1980) A corollary of this
commonality is that accounting policy does not
represent the interests of other classes or groups
in society For example Lowe etal ( 1981 ) argue
that accounting policies tend to serve the
interest of the financial sector as opposed to the
industrial sector in the U I~ Accounting (and
especially capital market) research may then be
seen to be contributing to the de-industrialisa-
tion of the U I~ economy (Singh, 1977) Such
research focuses on facilitating the international
mobility of capital funds to the most "profitable"
alternatives rather than the maintenance and
development of operating units
A PEA approach -- by emphasising the institu-
tional features of society and adopting a conflict
model of society -- provides a framework for
studies which attempt to uncover the influence
that narrow sectional interests have in defining
accounting problems and indeed the choice of
feasible ways of resolving these problems. Thus
the problems in accounting for multinational
companies are conventionally interpretated in
terms of the problems for the multinationals --
in relation, for example, to currency translation
The problems of multinational companies might
however be seen from the perspective of host
countries. From a host country perspective,
problems inviting solutions in which accounting
may have a part to play include transfer pricing
rules, pricing of technology and control of remit-
tances to home countries Instead, it has been
suggested by Rueschhoff (1976) that the largest
benefits from the international standardization

of accounting practice accrue to multinational
corporations and auditing firms. Similarly, the
large research effort into inflation accounting in
the U.K. in the late 1960s and early 1970s may
have been influenced by factors others than the
rate of inflation in the economy Thompson
(1978) and Burchell et al. (1980) suggest that
there had been a significant shift in the distribu-
tion of income away from profits and dividends
to wages and hence the pressure for an inflation
accounting standard may be associated with a
desire to re-distribute wealth "back" towards
shareholder interests.
Research into the process of identifying
accounting problems might also consider how
financial sponsorship encourages types of
accounting research. With the increased funding
by professional firms since the late 1970s (e g.
Peat, Marwick, Mitchell & Co, 1976) accounting
research has appeared to shift almost exclusively
towards the interests of large auditing firms --
e.g auditor's judgements (e.g. Felix & Kinney,
1982) statistical sampling (eg Duke et al.,
1982) and the management of audit workers
(e.g. Jiambalvo, 1982; Wolf, 1981). Accounting
researchers seem by and large, to have been
overwhelmed by these firms' identification of
accounting problems State agencies such as the
SEC and the SSRC (in the U K.) and accounting
organizations such as the FASB and the ASC
together provide a significant proportton of the
total funds available for accounting research
These bodies not only respond to requests for
funds, they also initiate research into problems
which they believe are important and under-
researched. Therefore, the extent to which
these funding organizations are themselves inde-
pendent of the chents of accounting and indeed
their understanding of the nature of the public
interest deserve the attention of accounting
researchers.
SUMMARY AND CONCLUSIONS
Our concern in thts paper has been to present
a view of accounting research, particularly that
related to views of the social value of accounting
reports, which offers some alternative to the cur-
rent paradigm. The view expressed here is that
accounting research should reflect upon the
soctal, political and economic context in which
accounting operates. Failure to consider this
context has led to an emphasis on designing
accounting reports that are in the interests of
shareholders, and not necessarily in the interests
of other groups in society
The emphasis on shareholders' interests is to
be found in the studies concerned with the use-
fulness of corporate accounting reports for the
decistons of individual investors and in the par-
tlal equilibrium studies of the value of account-
ing information within an efficient stock market
Moreover, the general equilibrium approaches
using orthodox economic analysis are quickly
reduced to a shareholder orientation by assum-
ing the existence of perfect markets and by
ignoring the effects of accounting reports on the
distribution of income and wealth in the
economy Finally, the interests of shareholders
or their agents, corporate management, also pre-
dominate in the studies of the economic con-
sequences of accounting reports, despite the
recognition at the conceptual level of this
approach that other groups in society do exist
We suggest an alternative approach, the
development of a political economy of account-
ing, which explicitly considers the relationships
between accounting and the instttutional struc-
ture of the economy. The attributes for relevant
accounting research withm this approach may
be summarized by the following exhortations to
researchers be explicitly normative -- make
your value judgements explicit; be descriptive
-- describe and interpret the practtce of
accounting, accounting in action; and be critical
- - recognize the contested nature of the
accounting problematic and particularly the
concept of the public interst We have also
sketched three suggestions for the kind of
research which might be undertaken within a
political economy of accounting, the role and
form of accounting within alternative definitions
of social welfare; the use of accounting reports
as ideological instruments, and the interests and
institutions which influence the identification of

accounting problems and hence the type of
accounting research which is undertaken We
are not suggesting that such research will be
easy. Given the dominance and intolerance of
the current approach to research in corporate
reporting, obtaining funding and journal space
for more radical research is likely to be difficult
We have also indicated that research is neces-
sary at a conceptual level and at an empirical
level The problems of the latter (mcludmg
those relating to the difficulties of using social
and economic statistics which are produced on
the basis of one particular conceptuahsatton of
society) will hopefully not discourage resear-
chers to investigate the kind of issues outlined,
but mstead will represent a challenge to those
researchers concerned to produce "better"
accounts and a more accountable accounting
It follows that although we accept that it is
desirable (within a democratic soctety) to
encourage a variety of scientific research prog-
rammes in accountmg research, it is an impor-
tant theme of this paper that many markets are
not neutral in their activittes or in thetr effects
Therefore, it may be insufficient to rely on the
market for accounting research to foster
research which is stgnificantly different in
approach from the extsting paradigm Rather, in
order to develop a pohtical economy of account-
ing, normative, descriptive and crttical research
needs to be actively promoted and nurtured
BIBLIOGRAPHY
Abdel-Khahk, RA User Preference Ordermg Value A Model, The Accountmg Revtew (July 1971 ) pp
475-71
Accounting Standards Steering Committee, The Corporate Report (ICAEW, 1975)
Adelberg, A H, A Methodology for Measuring the Understandabthty of Financial Report Measures,Journal
of Accounting Research (Autumn 1979) pp 565--592
Advisory Commtttee on Corporate Dtsclosure, Report of the Advisory Committee on Corporate Dts-
closure to the Securtttes and Exchange Commtttee, Us Congress Committee Prmt 95--29 (US
Government Printing Office, 1977)
Alchtan, AA & Demsetz, H, Production, Informatton Costs and Economic Orgamzatton, Amertcan
EconomwRevzew (December 1972) pp 777-795
Amertcan Accounting Assoclatton, Report of the Commtttee on the Social Consequences of Accounting
lnformatton (AAA, 1978 )
American Institute of Cermqed Pubhc Accountants, Oblect~ves Committee, Objectwes of Fmanctal
Statements (American Institute of Certified Pubhc Accountants, 1973 )
Arrow, K., Soctal Chotce and Indtvtdual Values (New York John Wiley, 1951 )
Ball, R, Anomahes m Relat~onshtps Between Securities' Yields and Yteld Surrogates,Journal of Fmanctal
Economtcs (June-September 1978) pp 103-126
Ball, R, Discussion of Accounting for Research and Development Costs The Impact on Research and
Development Expenditures, Supplement toJournal of Accounting Research (1980) pp 27-37
Ball, R & Brown, P, Portfoho Theory and Accountm~ Journal of Accounting Research (Autumn 1969 )
pp 300-323
Beaver, W ,FmanctalReportmg An AccountmgRevolutlon ( Englewood Chffs, NJ Prentice--Hall, 1981 )
Beaver, W & Demskl, J, The Nature of Financial Accounting Objectives ASummary and Synthesis, Studtes
on Fmancml Accounting Objectives, Supplement to Journal of Accountmg Research (1974) pp
170-187
Beaver, W & Dukes, R, Interpenod Tax Allocanons, Earnmgs, Expectations and the Behawour of Securtty
Prices, The Accountmg Review (JanuatT 1979) pp 38-46
Beaver, W H, Christie, A A &Grtffin, P A, The Informatmn Content of SEC Accounting Sertes Release
No 190,Journal of Accountmg and Economtcs (August 1980) pp 127-157
Benston, G, Pubhc (U S ) Compared to Private (U K.) Regulatmns of Corporation Fmancml Disclosure, The
AccounttngRevtew (July 1976) pp 48~--498
Benton, T, "Objective" Interests and the Sociology of Power. Aoctology (May 1981 ) pp 161-184

Blddle, G C, Accounting Methods and Management Deoslons The Case of Inventory Costmg and
Inventory Pohcy, supplement toJournal of Accounting Research (1980) pp 235-280
Block, F, The Fiscal Crisis of the Capitalist State, Annual Review of Sociology ( 1981 ) pp 1-27
Boland, RJ, Myth and Technology m the American Accounting Profession, Journal of Management
Studies (January 1982) pp 109-127
Brennan, WJ, The Impact of the Inflation Accounting Debate on Accounting Standard-Setting Bodies, in
Zlmmerman, V K., (ed) The Impact of Inflatzon on Accounting A Global View (Centre for Inter-
nat~onal Education and Research in Accounting 1979) pp 209-223
Brtston, RJ, The Private Shareholder and The Corporate Report Some Further Evidence, TheAccountants
Magazine (December 1977) pp 504-507
Brlston, R & Perks, R, The External Auditor His Role and Cost to Society, Accountancy (November 1977)
pp 48-52
Bromwlch, M, The Posstbthty of Partial Accounting Standards, The Accounting Review (April 1980) pp
288-300
Bryer, R, Bngnall, TJ & Maunders, A R, Account:ng ForBr:ttsh Steel, (Gower Press, 1981 )
Brown, P R, A Descriptive Analysis of Select Input Bases of the FASB,Journal of Accounting Research
(Spring 1981 ) pp 232-248
Burchell, S, Clubb, C, & Hopwood, A, Accounting in its Sooal Context Towards a History of Value Added
m the U K., unpublished, London Busmess School, 1981
Burchell, S, Clubb, C, Hopwood, A, Hughes,J & Nahaplet, J, The Role of Accounting in Orgamzattons and
Societies Accountm~ Organ:zat:ons and Soc:ety (1980) pp 5-27
Burchell, S, Cooper, D, & Sherer, M, The Conceptual Framework -- One Step Forwards, Two Back,
Accountancy ( May 1982 ), p 15
Burrell, G & Morgan, G, Soclolog:calParadlgms & Orgamsation Analys:s (London Hememan, 1979)
Butterworth, J, Gtbbms, M & Kang, R, The Structure of Accounting Theory Some Basic Conceputal and
Methodological Issues, Unpublished, University of Brtths Columbia, 1981
Carlsson, J • Ehn, P, Erlander, B, Perby, M L, & Sandberg, A, Planning and Control from the Perspective of
Labour, Account:ng Orgamzat:ons and Soc:et}, (1978) pp 249-260
Carmtchael, D, The Accounting Profession What are the Facts, m Davldson. S (ed) The Accounting
Establishment m Perspectwe (Arthur Young, 1979)
Chalmers, A F, Whatls Th:s Thing Called Science~(Milton Keynes The Open Umverslty Press, 1978)
Chambers, R, Accountml6 Evaluation & Econom:c Behav:our (Englewood Chffs, NJ Prentice-Hall,
1966)
Chang, LS & Most, K.S. Financial Statements and Investment Decisions, Unpubhshed, Florida Inter-
national University, 1979
Cherns, A, Alienation and Accountancy, Accounting Organ:zat:ons and Society (1978) pp 105-114
Chrtstenson, C, The Methodology of Positive Accounting, The Account:ng Review (January 1983) pp
1--22
Chua, W F, l.aughhn, R, Ix)we, EA & Puxty, AG, Four Perspectives on Accounting Methodology,
Unpubhshed, Umverstty of Sheffield ( 1981 )
Clarkson, C P E, Portfollo Select:on A S:mulatton of Trust Behav:our (Englewood Chffs, NJ Prentice-
Hall, 1962)
Coase, R, The Nature of the Ftrm,Econom:ca (1937), pp 386--405
Colhns, D W & Dent, W T, The Proposed Ehmmatlon of Full Cost Accounting m the Extractive Petroleum
Industry An Empirical Assessment of Market Consequences,Journal of Accounting and Economlcs
(March 1979) pp 3-44
Cooper, DJ, & Essex. S, Accounting Information and Employee Decision Makmg, Account:ng~ Orgamza-
t:ons and Soc:eO, (197"7) pp 201-218
Cooper, DJ, Lyons, M, & Sherer, MJ, Private Shareholder Understandmg A Critique and a Suggestion for
Relevant Accounting Research, Unpubhshed Working Paper No 50.7,Faculty of Commerce, Umverstty
of British Columbm (19"7)
Cushing, B, On the Posstblhty of Optimal Accounting Prmoples, TheAccount:ngRevzew (April 1977) pp
31)8-321
Cyert, R M, & lllrt, Y, Problems of Implementing the Truebold Report, Studies on Financial Accounting
Oblecttves, supplement toJournal of Accounting Research, (19"4) pp 29-4 "r
Davtdson, S, (ed), The Account:ng Establishment, In Perspect:ve Proceedings of the Arthur Young
ProJessors Roundtable 19.78, (The Councd of Arthur Young Professors, 19"79)

228 DAVIDJ COOPER and M1CHAELJ SHERER
Demsetz, H, Information and Efficiency Another Vtewpomt Journal of Law and Economics (Aprd
1969) pp 1--22
Demski, J, The General Imposstbthty of Normative Accounting Standards, The Accounting Revteu,
(October 1973) pp 718-728
Demski, J, Choice Among Fmanclal Reporting Alternatwes, The Accountmg Review (Aprd 1974) pp
221-232
Demslo, J, & Feltham, G A, Cost Determination A Conceptual Approach (Iowa Umverslty Press, 1976)
Dopuch, N, & Sunder, S, FASB's Statements on Objectives and Elements of Fmanctal Accounting A Review,
The Accountmg Review (January 1980) pp 1-21
Duke, G L, Netor, J & Lettch, R, Power Characteristics of Test Statistics m the Auditing Environment An
Empirical Study,Journal of Accountmg Research (Sprmg 1982) pp 42-67
Dukes, R E, Dyckman, T R & Elhott, J A, Accounting for Research and Development Costs The Impact on
Research and Development Expenditure, Supplement to Journal of Accountmg Research (1980)
pp 1-26
Edwards, E & Bell, P~ The Theory and Measurement of Busmess Income (Umverstty of Calfforma Press,
1961)
Edwards, J R, The Accounting Profession and Disclosure m Pubhshed Reports 1925-1935, Accountmg
and Busmess Research (Autumn 1976) pp 289-303
Emhorn, H & Hogarth, R M, Behavloural Decision Theory Processes ofJudgement and ChoiceJournal of
Accoun tzng Research (Sprmg 1981 ), pp 1-31, reprmted from Annual Review of Psychology ( 1981 )
pp 53-88
Enthoven, AJ H, Accountancy andEconomtcDevelopmentPoltcy (North-Holland, 1973)
Epstem, M J, The Usefulness of Annual Reports to Corporate Shareholders (Bureau of Business and
Economic Research, 1975)
Epstem, M, Flamholtz, E & McDonough, JJ, Corporate Social Accountmg m the U S State of the Art and
Future Prospects, Accounttng~ Organizations and Society (1976) pp 23-42
Fama, E F, Foundations of Fmance (Basic Books, 1976)
Financial Accountmg Standards Board, Economic Consequences of Financial Accountmg Standards
Selected Papers (FASB, 1978a)
Fmanclal Accountants Standards Board, Objectives of Financial Reporting by Business Enterprises (State-
ment of Financial Accounting Concept No 1) (FASB, 1978b)
FelLx, W & lednney, W R, Research m the Auditors Optmon Formulation Projects State of the Art, The
Accounting Review (Aprd 1982), pp 245-271
Fmdlay, M C, On Market Efficiency and Financial Accountmg, Abacus (1977) pp 106-122
Firth, M, The Valuation of Shares and the Efftctent Markets Theory (Macmillan Press, 1977)
Foley, E & Maunders, K., Accounting Information Disclosure and Collectwe Bargaining (Macmdlan,
1977)
Foster, G ,FmanctalStatementAnalysts(Englewood Chffs, NJ Prentice-Hall) 1978
Foster, G, Brdoff and the Capital Market,Journal of Accounting Research (Sprmg 1979) pp 262-274
Foster, G, Accounting Pohcy Decisions and Capital Market Research, Journal of Accounting and
Economics (March 1980a) pp 29-62
Foster, G, Externahties and Fmanctal Reporting, Journal of Fmance, (May 1980b) pp 521-533
Frey, B, Modern PolttrcalEconomy (Martin Robertson, 1978)
Gambhng, T E, SoctetalAccounting (George Allen & Unwm, 1974)
Gonedes, N, Corporation Stgnalhng, External Accountmg & Capital Market Equthbrtum Evidence on
Dtwdends, Income & Extraordinary ItemsJournalofAccountmgResearch(Sprmg, 1978), pp 26-79
Gonedes, N & Dopuch, N, Capital Market Equthbrmm, Information Production and Selectmg Accountmg
Techmques Theoretical Framework and Review of Empirical Work, Studies on Fmanctal Accounting
Objectives, supplement toJournal of Accountmg Research (1974), pp 48-129
Gonedes, N & Dopuch, N, Economics Analyses and Accounting Techmques Perspectives and Proposals,
Journal of Accountmg Research (Autumn 1979) pp 384--410
Goodm, R E, How to Determine Who Should Get What, Ethics (July 1975) pp 310-32 l
Goodman, P S & Pennmgs, J M (eds), New Perspectives m Orgamzattonal Effectweness (Jossey Bass,
1977)
Gouldner, A W, The Coming Crisis of Western Soctology( London Hememann, 1970 )
Graaff, J, Van, Theoretical Welfare Economics ( Cambridge Umverslty Press 1957 )

Gnflin, PA, What Harm has FASB 8 Actually Done~ Harvard Business Revww (July-August 1979) pp
8-18
Haber. S, Efftctency and Uphft. Scwntzftc Management m the Programme Era 1890-1920 (Umverslty of
Chtcago Press, 1964)
Habermas, J, Knowledge andHuman Interests (London Hememann, 1978)
Hakansson, N, Intertm Disclosure and Forecasts An Economic Analysts and a Framework for Choice, The
Accounting Review (Aprd 1977) pp 396--416
Hakansson, N H, On The Pohtlcs of Accountmg Dtsclosure and Measurement An Analysis of Economic
Incentlves,Journal of Accountmg Research Supplement (1981) pp 1-35
Hall, M & Wmsten, G B, The Ambtguous Notion of Efficiency, TheEconomtcJournal(1959) pp 71-86
Hannah, L & Kay, J A, Concentration In Modern Industry, ( London Macmillan, 1977)
Haned, A A, The Semantic Dtmenslons of Fmanctai Statements,Journal of Accountzng Research (Autumn
1972) pp 376-391
Haned, A A, Measurement of Meaning m Financial Reports Journal ofAccountmgResearch (Spring 1973)
pp 117-145
Harmg, J R, Accountmg Rules and The Accountmg Estabhshment,Journal of Busmess (October 1979)
pp 507-520
Harrts, M & Ravlv, A, Some Results on Incentive Contracts wtth Apphcatlons to Education and Employ-
ment Health Insurance and Law Enforcement, Amertcan Economic Review (March 1978) pp 20-30
Heald, D, The Economic and Fmanctal Control of U K. Nattonahsed Industries, The Economic Journal
(June 1980) pp 243-265
Hmdess, B, The Use of Official Stattsttcs m Soctology( London Macmillan, 1973)
Hlrschlelfer, J, The Prtvate and Soctal Value of Information & The Reward to lnventtve Acttvtty, American
EconomtcRevtew (Setember, 1971 ) pp 561-574
Holhs, M & Nell, E, RattonalEconomtcMan (Cambrtdge Umverstty Press, 1975)
Holmstrom, B, Moral Hazard and Observabthty, BellJournal ofEconomtc~ (Sprmg 1979) pp 74-91
Hoogvelt, A & Tmker, A M, The Role of the Colomal and Post Colomal State m Imperahsm,Journal of
Modern Studies (1978) pp 67-79
Hope, T & Gray, R, Power and Pohcy Making The Development of an R & D StandardJournal of Busmess
Fmance and Accounting (Wmter 1982) pp 531-558
Hopwood, A, Burchell, S & Clubb, C, The Development of Accounting m tts Internattonal Context Past
Concerns and Emergent Issues, Unpubhshed. London Business School, 1979
Horwttz, B N & Kolodny, R, Line of Business Reportmg and Security Prices An Analysis of an SEC Dts-
closure Rule, BellJournal of Economics (Sprmg 1977) pp 234-249
Horw~tz, B N & Kolodny, R, The Economtc Effects of Involuntary Umformtty m the Fmanctal Reporting of
R & D Expenditure, supplement toJournal of Accounting Research (1980) pp 38-74
Hussem, M E & Ketz, J E, Ruhng Ehtes of the FASB A Study of the Btg Eight,Journal of Accounting
Audttmg andFinance (Summer 1980), pp 354-367
Inflation Accountmg Committee, Inflation Accountmg Cmnd 6225, (London HMSO, 1975)
Iltrt, Y, Theory of Accountmg Measurement (Amertcan Accounting Association, 1975)
llln, Y, Htstorical CostAccounting and ItsRattonality (Canadian Certified General Accountants Research
Foundation, 1981 )
Irvme, J, Mdes, I & Evans, J, Introduction m J lrvme, 1 Mills & J Evans (eds), Demysttfmg Social
Statzst:cs (Pluto Press, 1979)
Jensen, M C, & Meckhng, W, Theory of the Firm Management Behawour, Agency Costs and Ownership
Structure,Journal of Fmanctal Economtcs (1976) pp 305-360
Jlambalvo, J, Measures of Accuracy and Congruence m the Performance Evaluatton of CPA Personnel Rep-
hcatton and Extensions,Journal of Accounting Research (Sprmg 1982) pp 152-161
Johnson, T J, Professions and Power ( London Macmillan, 1972 )
Jones. E, Accountancl, and The Brzttsh Economy 1840-1980 The Evolution of Ernst and Whmney
(Batsford, 1981 )
Kalay, A, Stockholder-Bondholder Confhct and Dtvtdends Constraint.Journal of Fmancml Economics
(Jul) 1982)pp 211-236
Kanter, R M & Brmkerhoff. D, Orgamzatlonal Performance Recent Developments m Management~4nnual
Review of~octology ( 1981 ) pp 321-349
Kelly-Newton, L, An Investtgatton of Factors lnfluencmg Corporate Managers' Reaction to Accountmg
Pohcy, Unpubhshed, Graduate School of Management. Untverslty of Calfforma, Los Angeles (1980)

Political Economy Framework for Analyzing Corporate Accounting Reports

Political Economy Framework for Analyzing Corporate Accounting Reports

Recommended

Recommended

More Related Content

Similar to Political Economy Framework for Analyzing Corporate Accounting Reports

Similar to Political Economy Framework for Analyzing Corporate Accounting Reports (20)

More from Sri Apriyanti Husain

More from Sri Apriyanti Husain (20)

Recently uploaded

Recently uploaded (20)

Political Economy Framework for Analyzing Corporate Accounting Reports