Empirical Research on Accounting Choice

This paper provides a structure for analyzing the outstanding issues relating to accounting choice. We rely on the goals of the decision maker to classify accounting choices. Using this framework, we assess the extent to which our understanding of accounting choice has increased beyond that of the 1970s and 1980s. We conclude that the field has made modest progress in advancing the state of knowledge during the last decade. First, there have been few attempts to consider the role of multiple goals. Second, accounting research generally fails to distinguish appropriately between what is endogenous and exogenous. Finally, absent a theory, research has limited itself to the pathological use of accounting choice. There are, however, opportunities for future research on accounting choice. First, there is a need for greater evidence on the economic implications of the accounting choices. Second, there should be greater emphasis on the costs and benefits of addressing the various conflicts which drive accounting choice. Third, researchers should develop better theoretical models to guide empirical research.