Research Papers Positive Accounting Theory

Research Papers Positive Accounting Theory-40
Our literature review is organized around ideas of PAT, its hypotheses, supporters and followers, and finally critiques of this theory.The remaining part of this chapter proceeds as follows: We first examine the forces that give rise to this theory.Academic studies on the factors that affect a firm's accounting choices triggered a paradigm change in accounting research, altering the nature of literature from prescriptive to predictive.

Our literature review is organized around ideas of PAT, its hypotheses, supporters and followers, and finally critiques of this theory.The remaining part of this chapter proceeds as follows: We first examine the forces that give rise to this theory.Academic studies on the factors that affect a firm's accounting choices triggered a paradigm change in accounting research, altering the nature of literature from prescriptive to predictive.

The term “Positive Accounting Theory” has come to practise to refer to the accounting theory developed and named by Watts and Zimmerman.

The authors seek to appreciate and explain the concept of economic consequences of the interests of managers and financial accounting and reporting.

We conclude that this theory has generated several useful insights on managers' reporting decisions.

In this section, we examine the forces and the publications that had a major impact on the emergence of PAT.

Boland and Gordon assert that this economic-based accounting theory is a combination of Milton Friedman's instrumentalism and Paul Samuelson's positivism [15].

They also add that Watts and Zimmerman practise the methodology as that of the Chicago School economists [6, 15].In 1976, the publication of Jensen and Merckling's article on agency theory had a major impact on PAT [14].In agency theory, the firm is analysed as “a nexus of contracts” and this concept is accepted by positive accounting research.The first form is the opportunistic form asserting that managers in electing accounting procedures react to maximize the wealth, and the second form is the efficiency form for good corporate governance.PAT has been subjected to severe and numerous criticisms from different perspectives, which are critiques on research method, economics base, and reference to philosophy of science.In other words, their major aim is to explain and predict why managers and accountants choose particular accounting methods in preference to others.Furthermore, they assert that firm's attributes, such as leverage and size, are predictive variables of the firm's accounting choice.Besides their recommendations on teaching methods, these authors stressed the need to develop research based on the formulation and testing of the hypotheses.They also describe the resources necessary to advance the level of business studies.They gave rise to a huge literature of capital markets research [3].A significant number of academic publications investigated the determinants of the shift in paradigm from narrative to positive research. Howell published “Higher education for business” and Franck C.

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