DETERMINANTS OF ACCOUNTING POLICY CHOICE IN THE AUSTRALIAN PROPERTY INDUSTRY: A PORTFOLIO APPROACH

: The objective of this research is to explain accounting policy choice in the Australian property industry by reference to costly contracting theory. This paper makes three departures from the predominant literature. First, instead of focusing on a single policy choice, it focuses on a portfolio of...

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Bibliographic Details
Published in:Accounting and finance (Parkville) 1994-11, Vol.34 (2), p.1-20
Main Authors: Aitken, Michael J., Loftus, Janice A.
Format: Article
Language:English
Subjects:
Accounting policies
Book value
Compensation plans
Costs
Disclosure
Equity
Hypotheses
Interviews
Proxies
Real estate
Research design
Statistical data
Studies
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Summary:: The objective of this research is to explain accounting policy choice in the Australian property industry by reference to costly contracting theory. This paper makes three departures from the predominant literature. First, instead of focusing on a single policy choice, it focuses on a portfolio of 15 choices. Second, instead of measuring each policy choice dichotomously, it measures the dollar effect of each policy choice. Finally, the research focuses on the impact of policy choices on owners' equity as well as income. The results confirm the importance of compensation arrangements as a determinant of accounting policy choice but fail to provide evidence that debt constraints or political costs are significant determinants of accounting policy choice. These results suggest that including property firms in a more heterogeneous sample may reduce the power of tests on the debt constraints and political costs hypotheses. More generally (when compared to previous research) the results suggest that the determinants of policy choice are likely to be industry specific.
ISSN:0810-5391
1467-629X
DOI:10.1111/j.1467-629X.1994.tb00266.x