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Towards an understanding of the role of standard setters in standard setting

Author

Listed:
  • Abigail McIntosh Allen

    (Harvard Business School)

  • Karthik Ramanna

    (Harvard Business School, Accounting and Management Unit)

Abstract

We investigate the effect of standard setters in standard setting: We examine how certain professional and political characteristics of FASB members and SEC commissioners predict the accounting "reliability" and "relevance" of proposed standards. Notably, we find FASB members with backgrounds in financial services are more likely to propose standards that decrease "reliability" and increase "relevance," partly due to their tendency to propose fair-value methods. We find opposite results for FASB members affiliated with the Democratic Party, although only when excluding financial-services background as an independent variable. Jackknife procedures show that results are robust to omitting any individual standard setter.

Suggested Citation

  • Abigail McIntosh Allen & Karthik Ramanna, 2010. "Towards an understanding of the role of standard setters in standard setting," Harvard Business School Working Papers 10-105, Harvard Business School, revised May 2012.
    • Handle: RePEc:hbs:wpaper:10-105
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    Citations

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    Cited by:

    1. Ramanna Karthik, 2013. "The International Politics of IFRS Harmonization," Accounting, Economics, and Law: A Convivium, De Gruyter, vol. 3(2), pages 1-46, January.
    2. Lin Liao & Helen Kang & Richard D. Morris, 2021. "The value relevance of fair value and historical cost measurements during the financial crisis," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 61(S1), pages 2069-2107, April.
    3. Mitica Pepi & Traian Cristin Nicolae, 2013. "Challenges Of Financial Audit - The Impact Of Introducing Unique Regulation Of Financial Markets In Romania," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(1), pages 1334-1344, July.

    More about this item

    Keywords

    accounting; FASB; politics; relevance; reliability; standard setting;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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