Income Strategies of Listed and Unlisted
Companies: An Empirical Study of
Accounting Method Choices
Abstractqnx操作系统
This paper explores whether the political and contracting environments for listed and unlisted companies gives ri to different wealth incentives for management to judiciously lect a portfolio of accounting procedures for the firm. The analysis indicates significant differences in the method choices made by the managers of listed and unlisted firms. For the listed firms, size as a proxy for political costs is negatively related to portfolio choice, supporting the political cost hypothesis. In addition, leverage and directors' percentage ownership are positively related to portfolio choice and thus support the debt contracting cost hypothesis. In contrast, none of the contracting or political cost variables are significantly related to the choice of accounting method portfolio by unlisted firms. Overall th
e evidence provides some support for the positive accounting hypothesis that firms choo income strategies.
INTRODUCTION
Much empirical rearch has developed and tested Watts [1977] and Watts and Zimmennan's [1978, 1979] positive theory of lobbying and accounting method decisions. However, the majority of the voluntary method choice studies concentrate on single accounting method choices. They examine individual accounting method choices for a cross-ction of firms in isolation from all other accounting method choices made by印章效果 tho firms. The exception to this generalization is Zmijewski and Hagennan's [1981] portfolio choice study which maintains that managers do not choo accounting methods in isolation. Rather managers choo a portfolio of accounting procedures. The choice is a function of the net management wealth effects associated with the contracting and political costs the firm faces. In order to maximize management wealth Zmijewski and Hagennan [1981] contend that managers will choo accounting methods so at any point
in time their firm肾气不足怎么调理 will employ an optimal mix of accounting methods. That is, the firm's portfolio of methods will minimize the contracting and political costs to the firm and thus maximize the bonus payments and net share returns to managers.
This paper extends the spar rearch to date (e Ronen and Aharoni [1989], and working paper by Aitken and Loftus [1991]) that builds on the notion that accounting choices are made at the portfolio level rather than at the individual level. The contribution of the paper is to explore the portfolio choices made by the managers of firms operating in significantly different political and contracting environments. Listed意外的相遇 firms have a higher public image than unlisted firms and are subject to the discipline of public debt and equity markets. Thus it is expected that political and debt contracting cost variables as well as the level of managerial ownership will have a greater influence on the accounting portfolio choices of listed firms. The current paper focus on explaining the joint choice of the methods ud to account for inventories, depreciation, and ast revaluations. The analysis indicates the portfolio of methods chon by listed and unlisted firms are different, but that only the method choices of listed firms are associated with contracting a
nd political cost variables.
摩羯男和天秤女PORTFOLIO OF METHODS内存卡多少钱
GAAP affords managers discretion in the choice of method to u in recording a range of business transactions. However, in this study we are interested in only tho method choices that impact on the determination of reported income. The t of possible method choices to study is further restricted to tho methods for which the actual choices made by firms are cross-ctionally different for a reasonably large sample of firms. This excludes method choices such as the decision to expen or capitalize rearch and development (R & D) expenditure, becau the treatment of R&D expenditure is disclod by only 17% of New Zealand listed companies. Three discretionary methods are identified as appropriate for the current study: inventory valuation, depreciation method for plant and equipment, and the basis (revalued or historic cost) for depreciating buildings.
Statement of Standard Accounting Practice 4 (SSAP4) covers the valuation and prenta
tion of inventories. The standard allows the u of any of veral methods of inventory valuation, including first in first out (FIFO), weighted average cost (对领导个人的评价WAC),二次元性感美女 last in first out (LIFO), ba stock, and specific identification. However, SSAP4 as drafted for 1985, the sample year of this study, states in paragraph 5.5 that" ... the historical cost of inventories should be accounted for using the FIFO formula or a weighted average cost formula."
In addition, paragraph 5.6 allows the u of specific identification for of goods that are not normally interchangeable or that are associated with a specific project. Paragraph 5.7 allows the u of LIFO or ba stock formula subject to disclosing the difference between inventory calculated on that basis, and inventory calculated on a FIFO or WAC basis. New Zealand tax law does not, however, allow the u of LIFO. Thus managers have in effect a choice between two formulae, FIFO and WAC. The former has an income increasing effect and the latter an income decreasing effect on current reported income, under the assumption that prices are increasing.
