Institutional theory and accounting rule choice: an analysis of four US state governments' decisions to adopt generally accepted accounting principles |
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| Authors: | Vivian L. Carpenter Ehsan H. Feroz |
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| Affiliation: | 1. Florida A & M University, School of Business and Industry, Division of Academic Programs, Tallahassee, FL 32307, USA;2. 125 School of Business and Accounting, University of Minnesota-Duluth, Department of Accounting, 10 University Drive, Duluth, MN 55812-2496, USA;1. Department of Marketing, Economics and Management School, Wuhan University, Wuhan 430072, PR China;2. Department of Marketing, College of Business, City University of Hong Kong, Tat Chee Avenue, Hong Kong;3. Department of Marketing, School of Business Administration, Southwestern University of Finance and Economics, Chengdu, PR China;1. Department of Accounting, College of Business, King Khalid University, P.O. Box 3247, Abha 61471, Saudi Arabia;2. School of Accounting, Information Systems and Supply Chain, College of Business and Law, RMIT University, Victoria, Australia, GPO Box 2476, 3001, Australia;1. Department of Accounting, School of Accounting, Information Systems and Supply Chain, College of Business and Law, RMIT University, Melbourne, Victoria, Australia;2. Department of Accounting and Data Analytics, La Trobe Business School, La Trobe University, Victoria, Australia;1. The University of York, The York Management School, Freboys Lane, York, YO10 5GD, UK;2. Faculty of Commerce, Port Said University, Egypt;3. The Open University, The Open University Business School, Walton Hall, Milton Keynes, MK7 6AA, UK;1. Department of Accounting, Birmingham Business School, University of Birmingham, Birmingham, B15 2TT, UK;2. Department of Management, School of Business, Deree - The American College of Greece, Athens, 15342, Greece;3. Accounting and Financial Management Subject Group, Portsmouth Business School, University of Portsmouth, Southsea, PO1 3DE, UK;1. Lehigh University, Department of Management, Bethlehem, PA 18015, USA;2. Lehigh University, Department of Economics, Bethlehem, PA 18015, USA |
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| Abstract: | In this study, we use institutional theory to explore how institutional pressures exerted on four state governments (New York, Michigan, Ohio, Delaware) influenced the decision of these governments to adopt or resist the use of generally accepted accounting principles (GAAP) for external financial reporting. We identify resource dependence as a potent form of coercive institutional pressure that was associated with early GAAP adoption. We identify three factors that may lead to initial resistance to institutional pressures for change. First, if accounting bureaucrats are not active in professional associations that promote GAAP adoption, they may miss the educational process that we believe is important to early adoption of GAAP. Second, organizational printing may impede GAAP adoption. Third, powerful interests may impede GAAP if the proposed GAAP legislation is expected to alter the existing power relationships. We found that key accounting bureaucrats in New York and Michigan used “compromise” as an initial strategic response to institutional pressures to adopt GAAP, Ohio's key accounting bureaucrat adopted a “defy” strategy, although the political leadership endorsed an “acquiesce” strategy. While Delaware initially employed a “manipulate”strategy with some success. Delaware did not adopt GAAP for external reporting until a political entrepreneur for GAAP emerged in the early 1990s. Our study suggests that all strategic responses to resist institutional pressures for GAAP adoption will ultimately fail because of the potency of the institutional pressures that result from the well organized professional accounting and governmental institutional fields. |
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