3920496
Description
Mind Map by yvonne.y.tang, updated more than 1 year ago
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Created by yvonne.y.tang
over 8 years ago
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Watts & Zimmerman's
Positive Accounting Theory
- attempts to Describe and Predict:
How people behave
- So claims to be a
Scientific Approach
- So emphasises
Empirical Testing
- So emphasises
Empirical Testing
- So claims to be a
Scientific Approach
- views an organization as
a Nexus of Contracts
- between Senior Managers
(directors who approve FS)
and
- Shareholders
- (Agency Theory)
relationship governed by
- Contract, including profit
based bonus scheme
- leading to Hypothesis
1: Bonus Plan (Healy Study, 1985)
- leading to Hypothesis
1: Bonus Plan (Healy Study, 1985)
- Contract, including profit
based bonus scheme
- (Agency Theory)
relationship governed by
- Debtholders
- relationship governed by
- Debt Covenant
- leading to Hypothesis
2: Debt Covenant
(Sweeny Study, 1994)
- leading to Hypothesis
2: Debt Covenant
(Sweeny Study, 1994)
- Debt Covenant
- relationship governed by
- Politicans, Media, etc.
- relationship influenced by
- Informal Contract
- leading to Hypothesis
3: Political Costs (Jones
Study)
- leading to Hypothesis
3: Political Costs (Jones
Study)
- Informal Contract
- relationship influenced by
- who can behave
Opportunistically
- who determine Financial
Statement Variables (e.g.
Profit Figure)
- by using Generally
Accepted Accounting
Principles, which provide
a Restricted Choice
- by using Generally
Accepted Accounting
Principles, which provide
a Restricted Choice
- Shareholders
- between Senior Managers
(directors who approve FS)
and
- makes no attempt to Guide
(which is Normative Theory)
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