When the Financial Accounting Standards Board's (FASB) conceptual framework (CF) was initially developed, contemporaneous observers believed the CF incorporated conflicting elements and that it only slightly favored the asset-and-liability (A&L) view of accounting. Now, however, the FASB has made it clear that the CF endorses the A&L view. It is likely that a number of factors, operating together, have contributed to the movement to the A&L view. I contribute to the literature by exploring a novel explanation in path dependence. Specifically, I consider whether the completion of the primary stage of the CF in 1985 stimulated U.S. accounting standard-setting institutions along a path dependent process, driven by reinforcement around early interpretations of the framework.
I develop and test hypotheses based on this theory. I empirically demonstrate that, relative to members selected in the pre-CF period, members selected in the post-CF period take voting positions that are (i) less like their constituent sponsoring organizations and (ii) more like one another; and that these shifts are related to standards favoring the A&L view. Using an analysis of comment letters I find that, relative to a control group, FASB members selected in the post-CF period express a stronger ex ante preference for A&L standards. This pattern of evidence makes it appear "as if," in the post-CF period, the Financial Accounting Foundation systematically selects FASB members whose views are in-line with the A&L view. Finally, I demonstrate a significant reduction in voting dissent among post-CF members but an increase in members dissenting because standards do not go far enough to advance the A&L view. This suggests that the FASB has become ideologically homogeneous with respect to the A&L view of accounting. I conclude by exploring the setting and discussing some consequences of these changes for standard-setting.
The empirical results presented in this study are consistent with path dependence. However, since the data are also consistent with alternative explanations that I cannot reject, further work will be necessary to confirm whether path dependence has had a meaningful impact on U.S. standard-setting institutions in the post-CF period.
Table of Contents
II. Background and Theory Development
IV. Empirical Design
VI. Discussion and Conclusion
Appendix 1: Links between frequently-used concepts
Appendix 2: Relationship between the FASB, FAF, sponsoring organizations, and standard-setting constituent groups
Appendix 3: Excerpts from comment letters to SFAC 3 that reference the A&L view or the R&E view
Appendix 4: Detail on categorization of comment letters
Appendix 5: Partition of population into combinations of FASB members
Appendix 6: Detail on categorization of FASB members' dissenting arguments
Appendix 7: Text of dissenting arguments identified as post-CF "inside dissent"
Figure 1: Positions of FASB members and sponsoring organizations on a Statement
Figure 2: Illustration of inside dissent and outside dissent
Figure 3: FASB dissent, constituent dissent, and Statement type for matched sample
Table 1: FASB Statements of Financial Accounting Concepts
Table 2: Variable detail: Definitions, construction, and availability
Table 3: Summary of FASB voting data by member, chairperson, and voting requirement
Table 4: Descriptive statistics for Statement-level variables
Table 5: Analysis of FASB and constituent positions in the pre- and post-CF periods
Table 6: Effect of Statement type on Representativeness pre- and post-CF
Table 7: Effect of Statement type on FASB dissent pre- and post-CF
Table 8: Analysis of comment letter signatories selected onto the FASB pre- and post-CF
Table 9: List of dissenting argument types on fair value Statements
About this Dissertation
|Committee Chair / Thesis Advisor|
|The Ideological Homogenization of the FASB ()||2018-08-28||