| Abstract: | There is significant evidence of the practice of creative accounting by large listed corporations. However, little is known about the process by which such schemes are devised and succeed in escaping legal and regulatory sanction. This study examines this process of creative compliance in the case of complex convertible securities issued by U.K. listed companies between 1987 and 1990. There was an active dialectic of creativity in the design of these instruments — a shift from avoidance to rules to avoidance again. The evidence shows how a small group of professionals in finance, law and accountancy cooperated in the development of these instruments. They helped the issuers to manage their financial reporting process in a way in which compliance was assured. Where regulatees are able to command such creative compliance skills and resources, regulators may find themselves facing an uphill struggle. |
