Musings on Accounting Research by Steve

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Assumptions leading to our interpretation of evidence

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Last post started an analysis of how fundamental macroeconomic views effects how we approach our accounting research without many of us realizing it! I suggested that this provided a fundamental argument in favour of a more diverse set of paradigms focused on accounting research. So let’s first see how it affects the generation of research questions.

For example: accounting and auditing regulators exist – what issues arise from that observation?

The monetarist sees this as an involvement of a third party in the free capital markets and immediately focuses on the costs of regulation and pines for a truly free market where prices are fully revealing. ( of course, for prices to be fully revealing in markets externalities need to be monetized so all costs are considered – but I digress) Hence, their focus is on the costs on the regulatee assuming that the best regulation is none. Benefits are hard to measure so the focus is on costs.

The Keynesian sees a regulator’s role as trying to ensure the market is more information based so that prices, such as they are, are efficiently set based on the best obtainable information. Hence, they see costs of regulation as part of the costs of keeping up the capitalist production system. They are interested in whether people can actually interpret and apply the regulation in an effective, and to a lesser extent, efficient manner.

The critical theorist (a Keynesian in the extreme form) sees the fact that regulators tend to be “captured” over time by those they regulate and hence believe that regulations move towards being symbolic rather than substantive. They view their role as revealing ” the emperor has no clothes.” In other words show that the powerful can dominant the regulator who is tasked with preventing that.

While very simple, this analysis has attempted to show how accounting research questions get framed by our understanding of the macroeconomic world. Next post – how does it require multiple paradigms in accounting research?


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