Accounting theory & Accountability essay on stock exchange
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Powerpointslides-PositiveAccountingTheoryPart2.pptxAccounting Theory
Positive Accounting Theory (PAT) Part 2
1
The 5 key Learning Objectives in this lecture about PAT
At the conclusion of this lecture, you should have an appreciation of:
The principal arguments of a positive accounting theory
Links between accounting information and share markets
How contractual relationships impact on managerial accounting policy choice
How principals curb opportunistic behaviour by managers
The incentives that induce managers to contract
Institutional theory
Legitimacy theory and
Stakeholder theory
Institutional Theory
It considers how rules, norms and routines become established as authoritative guidelines, and considers how these elements are created, adopted and adapted over time.
Practices within organisations can be predicted from perceptions of legitimate behaviour derived from cultural values, industry tradition, entity value etc
Comparison of Agency and Institutional Theories
Legitimacy Theory
Based on the idea of a social contract
Relates to the explicit and implicit expectations society has about how businesses should act to ensure they survive into the future.
Organisations need to show they are operating in accordance with the expectations in the social contract.
Legitimacy Theory
Organisational legitimacy
The values and norm evident in the social contract have changed over time.
In the past legitimacy was considered only in terms of economic performance.
Now businesses are now expected to consider a range of issues, including the environmental and social consequences of their activities
Accounting Disclosures and Legitimation
Lindblom identifies four ways an organisation can obtain or maintain legitimacy:
Seek to educate and inform society about actual changes in the organisation’s performance and activities
Seek to change the perceptions of society, but not actually change behaviour
Seek to manipulate perception by deflecting attention from the issue of concern to other related issues
Seek to change expectations of its performance.
Stakeholder Theory
Considers the relationships that exist between the organisation and its various stakeholders.
Stakeholders are ‘any group or individual who can affect or is affected by the achievements of an organisation’s objectives’
There are two versions of stakeholder theory
a normative theory, known as the ‘ethical branch’,
an empirical theory of management, which is a positive theory
Role of Accounting Information in Stakeholder Theory
One important way of meeting stakeholders’ needs and expectations is providing information about organisational activities and performance.
Stakeholder theory has been used to examine disclosure of voluntary information to stakeholders, most commonly relating to social and environmental performance.
The End
