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Accounting choice, market failure, and regulation Consolidated accounting adoption in New Zealand, 1946‐1957

Accounting choice, market failure, and regulation Consolidated accounting adoption in New... Purpose – The purpose of this paper is to explain the adoption of consolidated accounting for New Zealand holding companies during the period 1946‐1957. Design/methodology/approach – An explanatory, multiple‐case, holistic case study is used to explain the relative increase in consolidated accounting adoption in New Zealand following passage of the Companies Act 1955, in spite of that accounting choice remaining voluntary under the legislation. Findings – The explanation is subjected to replication tests for explanatory case studies, and is supported by the data from all 25 cases satisfying the criterion for inclusion in the study. Originality/value – The explanation differs from the micro‐economic explanations of accounting choice in terms of firm characteristics which are generated within the positive accounting research paradigm. It utilizes findings from research in the economics of standardization which show that mechanisms for co‐ordinating the behaviour of market participants enable them to capture benefits of market externalities which would otherwise be unavailable because of market failure. The explanation is that: the low rate of pre‐legislation consolidated accounting adoption was due to a market failure around the accounting information which rendered unilateral adoption generally uneconomic; and the post‐legislation surge in adoption was due to passage of the Act resolving the market failure by overcoming a co‐ordination problem for potential adopters, enabling them to realise positive network effects and, therewith, net benefits of adoption. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Pacific Accounting Review Emerald Publishing

Accounting choice, market failure, and regulation Consolidated accounting adoption in New Zealand, 1946‐1957

Pacific Accounting Review , Volume 23 (2): 21 – Sep 13, 2011

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Publisher
Emerald Publishing
Copyright
Copyright © 2011 Emerald Group Publishing Limited. All rights reserved.
ISSN
0114-0582
DOI
10.1108/01140581111163953
Publisher site
See Article on Publisher Site

Abstract

Purpose – The purpose of this paper is to explain the adoption of consolidated accounting for New Zealand holding companies during the period 1946‐1957. Design/methodology/approach – An explanatory, multiple‐case, holistic case study is used to explain the relative increase in consolidated accounting adoption in New Zealand following passage of the Companies Act 1955, in spite of that accounting choice remaining voluntary under the legislation. Findings – The explanation is subjected to replication tests for explanatory case studies, and is supported by the data from all 25 cases satisfying the criterion for inclusion in the study. Originality/value – The explanation differs from the micro‐economic explanations of accounting choice in terms of firm characteristics which are generated within the positive accounting research paradigm. It utilizes findings from research in the economics of standardization which show that mechanisms for co‐ordinating the behaviour of market participants enable them to capture benefits of market externalities which would otherwise be unavailable because of market failure. The explanation is that: the low rate of pre‐legislation consolidated accounting adoption was due to a market failure around the accounting information which rendered unilateral adoption generally uneconomic; and the post‐legislation surge in adoption was due to passage of the Act resolving the market failure by overcoming a co‐ordination problem for potential adopters, enabling them to realise positive network effects and, therewith, net benefits of adoption.

Journal

Pacific Accounting ReviewEmerald Publishing

Published: Sep 13, 2011

Keywords: Accounting choice; Accounting history; Accounting regulation; Consolidated accounting; Market failure; New Zealand

References