Take Action

Home | Faculty & Research Overview | Research

Research Details

Political Pressures and the Evolution of Disclosure Regulation, Review of Accounting Studies

Abstract

This paper develops a theory that describes the formation and evolution of accounting classifications, specifically as they relate to the reporting of favorable vs. unfavorable events. Informed owners may exert political pressures to pass regulations that would increase market prices, possibly working against the standard-setters mission and reducing investor surplus. In equilibrium, changes in the regulation depend on the status-quo, the standard-setters political influence and the cost-benefit of disclosure. If the standard-setter is sufficiently influent or disclosure costs are low, the standard features a classification that may become finer over time and converges to the level of disclosure preferred by standard-setters. Otherwise, political pressures may create endogenous cycles in the implemented regulation. During such cycles, periods of slow or moderate increases in mandatory disclosure are punctuated by short bursts of deregulation. Elaborating on some of the political constraints faced by standard-setters, the analysis provides a simple framework capturing why and when accounting regulations come to be.

Type

Article

Author(s)

Jeremy Bertomeu, Robert Magee

Date Published

2015

Citations

Bertomeu, Jeremy, and Robert Magee. 2015. Political Pressures and the Evolution of Disclosure Regulation. Review of Accounting Studies. 20(2): 775-802.

KELLOGG INSIGHT

Explore leading research and ideas

Find articles, podcast episodes, and videos that spark ideas in lifelong learners, and inspire those looking to advance in their careers.
learn more

COURSE CATALOG

Review Courses & Schedules

Access information about specific courses and their schedules by viewing the interactive course scheduler tool.
LEARN MORE

DEGREE PROGRAMS

Discover the path to your goals

Whether you choose our Full-Time, Part-Time or Executive MBA program, you’ll enjoy the same unparalleled education, exceptional faculty and distinctive culture.
learn more

Take Action