Skip to Main Content
HBS Home
  • About
  • Academic Programs
  • Alumni
  • Faculty & Research
  • Baker Library
  • Giving
  • Harvard Business Review
  • Initiatives
  • News
  • Recruit
  • Map / Directions
Working Knowledge
Business Research for Business Leaders
  • Browse All Articles
  • Popular Articles
  • Cold Call Podcasts
  • About Us
  • Leadership
  • Marketing
  • Finance
  • Management
  • Entrepreneurship
  • All Topics...
  • Topics
    • COVID-19
    • Entrepreneurship
    • Finance
    • Gender
    • Globalization
    • Leadership
    • Management
    • Negotiation
    • Social Enterprise
    • Strategy
  • Sections
    • Book
    • Cold Call Podcast
    • HBS Case
    • In Practice
    • Lessons from the Classroom
    • Op-Ed
    • Research & Ideas
    • Research Event
    • Sharpening Your Skills
    • What Do You Think?
    • Working Paper Summaries
  • Browse All
    • COVID-19 Business Impact Center
      COVID-19 Business Impact Center
      Towards an Understanding of the Role of Standard Setters in Standard Setting
      07 Dec 2010Working Paper Summaries

      Towards an Understanding of the Role of Standard Setters in Standard Setting

      by Abigail Allen and Karthik Ramanna
      Accounting standards promulgated by the Financial Accounting Standards Board (FASB) play an important role in the development and maintenance of capital markets worldwide, so it is important to understand how these standards come to be. Prior research has focused on the effect of corporate lobbying on the development of FASB standards, but has largely overlooked the role of the FASB members themselves. Looking at these individuals between 1973 and 2007, Harvard Business School doctoral candidate Abigail M. Allen and professor Karthik Ramanna examine how board members' professional experience, length of service on the board, and political leanings influenced accounting standards. Key concepts include:
      • While corporate lobbying is likely to influence the nature of accounting standards proposed by the FASB, the board members themselves are likely to shape Generally Accepted Accounting Principles (GAAP) by controlling which standards are proposed.
      • Length of service on the board is associated with proposing standards perceived both as more favorable by big auditors and as decreasing accounting "reliability."
      • Affiliation with the Democratic Party, measured by political donations, is associated with proposing standards perceived both as less favorable by big auditors and as increasing accounting reliability.
      • The evidence in this study can be used toward building a more comprehensive theory of accounting standard setting, which can be helpful in informing future efforts at designing standard setting institutions, including considerations on term limits and prior work experience.
      LinkedIn
      Email

      Author Abstract

      We investigate the idiosyncratic influence of standard setters in standard setting. In particular, we examine how FASB members' length of tenure on the board, their past professional experience, and their political contributions vary with the degree to which the accounting standards they propose are perceived as increasing accounting "relevance" and/or decreasing accounting "reliability." Among other results, we find that length of tenure on the board and a prior career in investment banking/investment management are associated with proposing standards perceived as decreasing accounting "reliability"; while contributions to the Democratic Party are associated with proposing standards perceived as increasing accounting "reliability." Broadly, the evidence, by highlighting the influence of standard setters, can broaden our understanding of the political economy of standard setting beyond the role of corporate lobbying.

      Paper Information

      • Full Working Paper Text
      • Working Paper Publication Date: September 2010
      • HBS Working Paper Number:
      • Faculty Unit(s): Accounting and Management
        Trending
          • 25 Feb 2019
          • Research & Ideas

          How Gender Stereotypes Kill a Woman’s Self-Confidence

          • 17 May 2017
          • Research & Ideas

          Minorities Who 'Whiten' Job Resumes Get More Interviews

          • 24 Feb 2021
          • Lessons from the Classroom

          What History's Biggest Wars Teach Us About Leading in Peace

          • 17 Feb 2021
          • Research & Ideas

          Pandemic Self-Care for CEOs: Rituals, Running, and Cognitive Restructuring

          • 22 Feb 2021
          • Book

          Reaching Today's Omnichannel Customer Takes a New Sales Strategy

      Find Related Articles
      • Accounting
      • Finance
      • Accounting

      Sign up for our weekly newsletter

      Interested in improving your business? Learn about fresh research and ideas from Harvard Business School faculty.
      ǁ
      Campus Map
      Harvard Business School Working Knowledge
      Baker Library | Bloomberg Center
      Soldiers Field
      Boston, MA 02163
      Email: Editor-in-Chief
      →Map & Directions
      →More Contact Information
      • Make a Gift
      • Site Map
      • Jobs
      • Harvard University
      • Trademarks
      • Policies
      • Digital Accessibility
      Copyright © President & Fellows of Harvard College