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The main thrust of existing behavioral finance is that psychological constraints and
biases affect trading and prices in capital markets, and managerial use of capital
markets (see, e.g., the review of Hirshleifer 2001). Rule making is a harder problem
than trading, so the potential for bias is even greater.^ Nevertheless, there is rela-
tively little work that even tangentially addresses whether psychological bias on
the part of designers has shaped accounting regulation.澳洲accounting代写,质量保证,童叟无欺
There is extensive work on other reasons for "bad" or imperfect accounting
rules, such as political pressure group activities (Watts and Zimmerman 1979),
including agency problems on the part of politicians and regulators and political
activity by accounting firms (e.g., Thornburg and Roberts 2008). However, the
CAR Vol. 26 No. 4 (Winter 2009)1070 Contemporary Accounting Research
ability of officials to choose bad policies, and of special interest groups to influence
policy in detrimental ways, is probably a consequence of the limited attention and
psychological biases of voters. Standard approaches to political economy often
assume psychological bias in the sense that voters do not rationally discount for the
expenditures of interested parties and the self-serving messages that pressure groups
promulgate (see, e.g., Caplan 2001; Hirshleifer 2008). Even if individuals have little
incentive to gather information ("rational ignorance"), rational voters should make
assessments that are correct on average. So we should not see systematic patterns
of success on the part of interest groups in fooling voters into accepting policies
that hurt the great majority of voters, such as farm subsidies.澳洲accounting代写,质量保证,童叟无欺
This suggests a direction for future research, to study how psychological bias
enters into political conflict over accounting regulation. This could involve bias on
the part of contending professional groups, politicians, and members of the general
public. Ironically, efforts at investor protection can also fall under the bad rules cate-
gory, because policymakers or commentators who seek to protect irrational users
may themselves be irrational in how they go about trying to do this.
A crucial proviso is that we are not trying to portray accounting as a whole as
a failure. On the contrary, accounting is a subtle human invention that was crucial
for the rise of the modem economy. Systems of record keeping have evolved over
millennia to be functional. Important accounting principles evolved spontaneously
over centuries and were later inferred from practice and codified (Waymire and
Basu 2008). However, as human constructs, rules and regulation are not perfect.
Psychology matters.澳洲accounting代写,质量保证,童叟无欺
We offer here some tentative psychological explanations of types (1) and (2)
for facts about historical cost accounting, conservatism, aggregation, a focus on
downside outcomes in risk disclosures, and tolerance of eamings smoothing. We
do not attempt a systematic evaluation of all possible competing explanations for
these accounting characteristics. Our focus is on offering some new possible explan-
ations rooted in psychology. We also suggest that psychological forces cause infor-
mal shifts in reporting and disclosure regulation and policy that can exacerbate
boom-bust pattems in financial markets.澳洲accounting代写,质量保证,童叟无欺