corporate campaign contributions repeat giving and the rewards to legislator reputation abstract are politicians who follow a strategy of reputational development rewarded with high levels of corporate campaign contributions reputational clarity could help to reduce uncertainty about a candidate and lead to greater campaign contributions from favored interests alternatively such clarity could alienate those who disagree and prevent the politician from obtaining contributions from groups on both sides of an issue we outline an approach that considers conditions under which a politician would or would not prefer reputational development and policy stance clarity and consistency in the context of repeat dealing with special interests our proxy for reputational development is the percentage of repeat givers to a legislator using data on corporate political action committee pac contributions to members of the u s house during the seven electoral cycles from 1983 84 to 1995 96 we explore a variety of alternative hypotheses and find that greater reputational development is rewarded with g

the limits of attraction consumer research has documented dozens of instances in which the introduction of an irrelevant third option affects preferences between the remaining two in nearly all such cases the unattractive dominated option enhances the attractiveness of the option it most resembles a phenomenon known as the attraction effect in the studies presented here however the authors contend that this phenomenon may be restricted to stylized product representations in which every product dimension is represented by a number e g a toaster oven that has a durability rating of 7 2 and ease of cleaning rating of 5 5 such effects do not typically occur when consumers experience the product e g taste a drink or when even one of the product attributes is represented perceptually e g differently priced hotel rooms whose quality is depicted with a photo the authors posit that perceptual representations of attributes do not support the sorts of comparisons that drive the attraction effect with highly stylized e

some talk money in politics a partial review of the literature the financing of political campaigns is an area of active scholarly study i review some of the recent literature and discuss important methodological issues that arise in empir ical research on campaign expenditures and campaign contributions the effects of campaign expenditures and advertising on candidate and ballot measure elections are summarized as are the impacts of contributions on contributors welfare many states have changed their campaign finance laws in the past few years and i describe work that exploits variations in these laws a discussion of the strategies used by interest groups to allocate their campaign contributions provides insights into contributors motives

the effect of ordering decisions by choice set size on consumer search consumers frequently engage in sequential decisions this article explores whether the order of these decisions can influence the manner in which consumers search through the possible choice options results from five studies suggest that ordering decisions by increasing vs decreasing choice set size leads to greater search depth measured by both sampling count and decision time initial smaller choice sets in increasing sequences appear to initiate a maximizing mind set which then persists even as participants encounter later larger choice sets these participants report a greater desire to maximize and are less satisfied with their decisions consistent with research on chronic maximizers in addition they continue to exhibit maximizing behavior in subsequent unrelated tasks supporting a mind set account of the differences in search in sum decision makers are proposed to be sticky adapters initial decision strategies seem to constrain the extent to which they adapt to new contexts

discussion of the influence of elections on the accounting choices of governmental entities kido petacchi and weber 2012 investigate whether the occurrence of a state gubernatorial election is important to understanding the accrual choices of preparers of the state s comprehensive annual financial report central to the authors argument is the idea that voters do not like budget deficits politicians in response have incentives to use accounting choices to mask deficits in the period before elections focusing on a specific accrual the changes in compensated absences liability the authors find evidence that the discretionary part of this accrual is smaller in the period before an election which is consistent with politicians attempting to improve the picture of the state s financial health in addition the authors show that accrual manipulation is positively associated with the vote share of incumbent governors in elections in my discussion i ask two questions 1 how strong are governors political incentives to manipulate accruals in the run up to elections 2 can the association between discretionary compensated absence accruals and elections be explained by forces other than politically motivated accounting manipulation i argue that the incentives to manipulate accruals might well be weak given strong disciplinary mechanisms that induce politicians to transparency what s more i document that elections might produce patterns in state employment as the compensated absences liability is linked to the payroll election induced changes in state employment might be reflected in this accrual evidence of an association between the compensated absences accrual and elections then does not necessarily imply that politicians manage accounting numbers to further illustrate this point i show empirically that gubernatorial elections have little explanatory power for state financial reporting choices that are unaffected by state employment jel classification h70 h72 m41

implications for gaap from an analysis of positive research in accounting based on extant literature we review the positive theory of gaap the theory predicts that gaap s principal focus is on control performance measurement and stewardship and that verifiability and conservatism are critical features of a gaap shaped by market forces we recognize the advantage of using fair values in circumstances where these are based on observable prices in liquid secondary markets but caution against expanding fair values to financial reporting more generally we conclude that rather than converging u s gaap with ifrs competition between the fasb and the iasb would allow gaap to better respond to market forces

towards an understanding of the role of standard setters in standard setting abstract we investigate the effect of standard setters in standard setting we examine how certain professional and political characteristics of fasb members and sec commissioners predict the accounting reliability and relevance of proposed standards notably we find fasb members with backgrounds in financial services are more likely to propose standards that decrease reliability and increase relevance partly due to their tendency to propose fair value methods we find opposite results for fasb members affiliated with the democratic party although only when excluding financial services background as an independent variable jackknife procedures show that results are robust to omitting any individual standard setter

market boundaries and product choice illustrating attraction and substitution effects what happens to the share of choices each item receives when the choice set boundaries are extended by adding a new item that is extremely good on one dimension but poor on the others first there is a substitution effect whereby the new item takes choice share mainly from similar items in the set second there is an attraction effect resulting in a general shift of preference toward the added item experimental studies show that choice patterns conflict with current theoretical and common sense ideas about the effect of added alternatives on choice

prominence versus dominance how relationships between alternatives drive decision strategy and choice this article argues that the structure of a choice set can influence the extent to which consumers weight a given attribute the results of seven experiments suggest that the relationship between options under consideration can influence preference ordering by shifting the decision strategy people adopt when constructing their preference in decisions in which people afford greater importance to one attribute versus another preference for an option that scores high on this prominent attribute may decrease when decoy options that are clearly better or worse than the focal options are inserted into the choice set the authors posit that this effect arises because decision makers initially and spontaneously use dominance cues rather than prominence when evaluating options and they continue to use this strategy even when it does not enable them to differentiate the alternatives under consideration the authors moderate this effect by prompting respondents to consider prominence and by manipulating the ord

adding asymmetrically dominated alternatives violations of regularity and the similarity hypothesis an asymmetrically dominated alternative is dominated by one item in the set but not by another adding such an alternative to a choice set can increase the probability of choosing the item that dominates it this result points to the inadequacy of many current choice models and suggests product line strategies that might not otherwise be intuitively plausible

discussion of the implications of unverifiable fair value accounting evidence from the political economy of goodwill accounting abstract ramanna 2007 the implications of unverifiable fair value accounting evidence from the political economy of goodwill accounting journal of accounting and economics provides interesting and novel evidence on how firms use contributions from their political action committees pacs to members of congress as a means of lobbying for preferred positions on the two exposure drafts that led to sfas 141 and sfas 142 my discussion raises some concerns about his main conclusion that pooling firms lobbied the fasb to obtain a fair value based impairment rule to facilitate their ability to manipulate financial statements i offer a more benign explanation and make some other observations about how this line of research could proceed in the future

campaign contributions and access an important and pervasive view of campaign contributions is that they are given to promote access to successful candidates under circumstances when such access would not ordinarily be given in this story access is valuable as it offers groups the opportunity to influence legislative decisions through the provision of policy relevant information under complete information regarding donors policy preferences i argue that this model predicts a negative relationship between contributions and the extent to which the groups and the recipient legislators preferences are similar however one of the more robust empirical findings in the literature is that this relationship is positive relaxing the informational assumption on donors preferences i reexamine the access story with a model in which campaign contributions can act as signals of policy preference and the informational value of access to any agent is endogenous

towards a theory of accounting regulation a discussion of the politics of disclosure regulation along the economic cycle the paper by bertomeu and magee this issue endogenizes accounting regulation by a majority seeking regulator and examines how the economic cycle affects mandatory reporting quality this discussion puts the paper in the broader context of a theory of accounting regulation then it focuses on crucial assumptions including the exogenous evolution of the economy the role of market frictions the modeling of reporting quality and the regulatory process and regulatory cycles and provides suggestions for future research

context dependent preferences the standard theory of choice based on value maximization associates with each option a real value such that given an offered set the decision maker chooses the option with the highest value despite its simplicity and intuitive appeal there is a growing body of data that is inconsistent with this theory in particular the relative attractiveness of x compared to y often depends on the presence or absence of a third option z and the market share of an option can actually be increased by enlarging the offered set we review recent empirical findings that are inconsistent with value maximization and present a context dependent model that expresses the value of each option as an additive combination of two components a contingent weighting process that captures the effect of the background context and a binary comparison process that describes the effect of the local context the model accounts for observed violations of the standard theory and provides a framework for analyzing context dependent p

optimal incentive schemes in bottleneck constrained production environments this paper analyzes the design of incentives and control measures in a manufacturing setting in the environment we consider the output of one operation serves as the input for a second operation where there is a bottleneck inputs must be processed at both workstations to produce the final output thus high production volume at the first operation does not translate into high benefits to the owner unless the output is subsequently processed at the second workstation this is a familiar context in manufacturing management lawrence and buss 1992 critics such as goldratt 1990 argue that in these situations typical cost accounting efficiency measurements motivate the nonbottleneck operation to produce output beyond the available capacity of the bottleneck resource leading to waste and excess work in process inventories however workers at the nonbottleneck operation can be induced not to overproduce if restricting production is desired by the owner we characterize management accounting practices and incentive arrangements that balance output production at nonbottleneck operations with the input demands of the bottleneck facility

the asymmetric impact of context on advantaged versus disadvantaged options abstractdespite substantial prior research regarding the effect of context on choices uncertainty remains regarding when particular context effects will be observed in this article the authors advance a new perspective on context dependent choices according to which context effects are a function of the relative advantage of one option over another and of the different strategies that decision makers evoke when making a choice they propose that context effects resulting from the addition of a third option to a two option set are more frequently observed when the added option is relatively similar adjacent to the disadvantaged alternative i e the lower share option in the set the authors conduct a series of studies to analyze the occurrence of context effects and find support for predictions related to asymmetric dominance and extremeness aversion

the implications of unverifiable fair value accounting evidence from the political economy of goodwill accounting abstract i study the evolution of sfas 142 which uses unverifiable fair value estimates to account for acquired goodwill i find evidence consistent with the fasb issuing sfas 142 in response to political pressure over its proposal to abolish pooling accounting the result is interesting given this proposal was due in part to sec concerns over pooling misuse i also find evidence consistent with lobbying support for sfas 142 increasing in firms discretion under the standard agency theory predicts such unverifiable discretion can be used opportunistically

choice based on reasons the case of attraction and compromise effects building on previous research this article proposes that choice behavior under preference uncertainty may be easier to explain by assuming that consumers select the alternative supported by the best reasons this approach provides an explanation for the so called attraction effect and leads to the prediction of a compromise effect consistent with the hypotheses the results indicate that 1 brands tend to gain share when they become compromise alternatives in a choice set 2 attraction and compromise effects tend to be stronger among subjects who expect to justify their decisions to others and 3 selections of dominating and compromise brands are associated with more elaborate and difficult decisions

asymmetric timeliness of earnings market to book and conservatism in financial reporting abstract using an accounting conservatism theory that reflects accounting s role in practice we investigate the relation between two extensively used measures of conservatism asymmetric timeliness of earnings and the market to book ratio mtb we predict and observe that when asymmetric timeliness is measured cumulatively over long periods its relation with end of period mtb is positive when asymmetric timeliness is measured over short periods its dependence on beginning of period composition of equity value ev is responsible for its negative association with mtb further asymmetric timeliness appears to measure conservatism more efficiently when it is estimated cumulatively over multiple periods

an analysis of value destruction in at t s acquisition of ncr abstract at t s 7 5 billion acquisition of ncr decreased the wealth of at t shareholders by between 3 9 billion and 6 5 billion and resulted in negative synergies of 1 3 to 3 0 billion we find that at t paid a documented 50 million and possibly as much as 500 million to satisfy pooling accounting thus boosting eps by roughly 17 but leaving cash flows unchanged we conclude that at t s decision to acquire ncr in what the market perceived as a value destroying transaction was related at least in part to the 1984 consent decree with the department of justice that led to the break up of at t

accounting discretion in fair value estimates an examination of sfas 142 goodwill impairments this study examines statement of financial accounting standards 142 adoption decisions focusing on the trade off between recording certain current goodwill impairment charges below the line and uncertain future impairment charges included in income from continuing operations we examine several potentially important economic incentives that firms face when making this accounting choice we find evidence suggesting that firms equity market concerns affect their preference for above the line vs below the line accounting treatment and firms debt contracting bonus turnover and exchange delisting incentives affect their decisions to accelerate or delay expense recognition our study contributes to the accounting choice literature by examining managers use of discretion when adopting a mandatory accounting change and by developing and testing explicit cross sectional hypotheses of the determinants of firms preferences for immediate below the line versus delayed above the line expense recognition

from low quality reporting to financial crises politics of disclosure regulation along the economic cycle abstract this paper examines how financial reporting regulations affect and respond to macroeconomic cycles by exploring a positive framework in which regulators subject to political pressures respond to cyclical demands by borrowers and lenders we establish that as economic conditions initially decline political power shifts toward interest groups favoring less financial transparency what follows is a counter cyclical increase in economic activity as more non reporting loans are financed possibly coincidental with more aggregate uncertainty during a recession reporting quality is increased potentially causing a crisis like adjustment of economic activity to the cycle we also discuss implications for event studies bank lobbying mark to market and cost of capital

the importance of accounting changes in debt contracts the cost of flexibility in covenant calculations abstract in this paper we examine how the exclusion of voluntary and mandatory accounting changes from the calculation of covenant compliance affects the interest rate charged on the loan after controlling for self selection bias and other factors known to affect loan spreads we find that the rate charged is 84 basis points lower when voluntary accounting changes are excluded and 71 basis points lower when mandatory accounting changes are excluded our results suggest that borrowers are willing to pay substantially higher interest rates to retain accounting flexibility that may help them avoid covenant violations and to avoid duplicate record keeping costs

asymmetric decoy effects on lower quality versus higher quality brands meta analytic and experimental evidence prior research demonstrates that adding decoys to choice sets can increase choice shares of brands similar to decoys while reducing shares of brands dissimilar to decoys such effects have been dubbed attraction effects and violate the principles of independence of irrelevant alternatives ha and regularity we report a meta analysis that in addition to revealing heretofore unsupported range effects demonstrates an effect of brand quality decoys reduce shares of lower quality competitors more than they reduce shares of higher quality competitors moreover whereas iia is violated throughout regularity is violated only when higher quality brands are targeted decoys increase shares of higher quality brands but typically do not increase shares of lower quality brands to assess the generalizability of the meta analytic pattern we tested decoy effects on two distinct populations in a large experiment the more traditional population replicated the meta analytic pattern standard asymmetry while the more nontraditional population reversed it these findings suggest that while the standard asymmetry is replicable it may not generalize to all market segments