Thesis: Lobbying for Accounting Standards

Sample Thesis Paper

Organizations have a strong incentive to lobby for particular accounting standard setting because of the way the reward structure has been based. Many of the managers in big companies are compensated based on a performance related pay structure whereby their remuneration is predicated on higher earnings being generated for the company.

This creates the impetus for upper management to lobby with standard setting bodies to allow them to manipulate accounting results in such a way so as to show growing and positive earnings on a consistent basis so as to get a greater amount of remuneration. Dhaliwal (1982) also explored the phenomenon through the perspective of the capital structure of the company involved. It is shown to be an important determinant of political lobbying by the researcher. It is also observed that loan agreements which include protective covenants push firms which have a highly leveraged portfolio to manipulate their accounts by going against the accounting standards and report a lower income and in this way they increase the volatility of their report earnings.

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