Learning Objectives
• In this chapter you will be introduced to
• how a positive theory differs from a normative theory
• the origins of Positive Accounting theory • the perceived role of accounting in minimising the
• some criticisms of PAT
Financial accounting theory chapter7实证会计理论
Positive compared to normative theories
• A positive theory seeks to explain and predict
Financial accounting theory chapter7实证会计理论
PAT defined—continued
• Focuses on relationships between various individuals and how accounting is used to assist in the functioning of these relationships
Financial Accounting Theory
Craig Deegan
Chapter 7 Positive Accounting Theory
Slides written by Michaela Rankin
Financial accounting theory chapter7实证会计理论
• All individuals’ action is driven by self-interest and individuals will act in an opportunistic manner to the extent that the actions will increase their wealth
• capital markets react in an efficient and unbiased manner to publicly available information
• Ball and Brown (1968) paper was crucial to the acceptance of the positive research paradigm
Financial accounting theory chapter7实证会计理论
Positive Accounting Theory defined
• PAT…is concerned with explaining accounting practice. It is designed to explain and predict which firms will and which firms will not use a particular method…but it says nothing as to which method a firm shoulves
• how particular accounting-based agreements with parties such as debtholders and managers can provide incentives for managers to manipulate accounting numbers
• does not incorporate notions of loyalty or morality
Financial accounting theory chapter7实证会计理论
Origins of PAT
• Started coming to prominence in mid 1960s
transaction costs of an organisation • how accounting can be used to reduce the costs
associated with various political processes
Financial accounting theory chapter7实证会计理论
• examples of relationships:
• owners and managers • managers and the firm’s debt providers
Financial accounting theory chapter7实证会计理论
Assumptions underlying PAT
Financial accounting theory chapter7实证会计理论
Origins of PAT—capital markets research
• Development of Efficient Markets Hypothesis (EMH) by Fama and others
particular phenomena • normative theories prescribe how a particular
practice should be undertaken
• the prescription might depart from existing practice
• paradigm shift from normative theories
• dominant research paradigm in 1970s and 1980s
• shift resulted from US reports on business education, and improved computing facilities enabling largescale statistical analysis