iTJAR EDITORIAL POLICY
Accounting Encounters of the TJAR Kind
Accounting theory has taken two distinct approaches: one supports understanding ofenvironment-specific local accounting institutions in various economies, while the other generalizes
American and West European accounting institutions across the world. It is easy, albeit costly,
to overlook this co-existence of two kinds of theory in the rush to world-wide convergence or
integration of accounting. Consideration and comparison of the two may allow us to carefully explore
the foundations of the arguments for convergence. However, such exploration requires accounting
scholars to observe, examine, evaluate, and critique the proposed systems and alternatives of whichconvergence itself is a salient element.
Encounters among cultures since the medieval times have created some commonalities but
have not yielded a universal culture. Whether economic encounters among disparate social systems
will yield, or even benefit from, a single system of accounting remains open. It is our hope that The
Japanese Accounting Review can serve as a forum for accounting scholars across the world to observe,
analyze, reflect, and report on encounters between the Western and other system of accounting. Theobvious, but far too often neglected, recognition of this duality is a central theme of TJAR. The TJAR
website states:
This new English-language journal, The Japanese Accounting Review, aims to present theworld with quality research on diverse themes relating to accounting, thereby helping
improve the economic welfare of societies around the world through better accounting
systems. We welcome submissions, which will be judged solely on the basis of qualityof their contributions, not on the status of the hypothesis, methodology, or the author.
Even the so-called capitalist societies differ in their stage of development, and may take very
different paths employing quite different institutions. If internationalization is interpreted to assume
that all these societies and their paths converge, there is little evidence in support. Accounting
scholarship could focus on seeking a critical understanding of the current diversity, and evaluating
alternatives for the future, without becoming a prematurely prescriptive cheerleader for convergence.
TJAR aims to help serve this function.
While the pages of TJAR are open to empirical examination of whether the theories originatingin the West are robust enough to afford us a better understanding of other economies, they also
welcome alternative theories, and their empirical scrutiny, that arise from institutions specific to theother economies. The current controversy in Japan about the adoption of IFRS is a good example ofa subject for such studies. Development of theories, and analyses of data relevant to cross-economy
encounters are important goals of TJAR.
December, 2011

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TJAR EDITORIAL NOTEAs I mentioned in the TJAR EDITORIAL POLICY, accounting theory has taken two distinct
approaches: one supports the understanding of environment-specific local accounting institutions invarious economies, while the other generalizes American and West European accounting institutions
across the world. However, in Volume 2, we published only eminent papers that focus exclusively
on Japanese accounting and financial problems. So, we expect that will TJAR publish many eminent
papers based on the two kinds of approach noted above in Volume 3 or subsequent volumes.
In Volume 2, a number of accounting and financial problems associated with Japanese firms areexamined, including earnings management, pension plans, relationships between banks and firms,securities analyst forecasts, and IFRS convergence.
The first paper demonstrates empirically that income smoothing behavior undertaken by themanagement of Japanese firms has information content, in that it indicates that management isconfident that they can maintain stable earnings and dividends.
The second paper indicates that Japanese firms have a high likelihood of adopting a new definedcontribution (DC) pension plan with an increase in the size of the firm. It also has a low likelihoodof adopting a DC pension plan with an increase in the extent of underfunding of the firm's existing
DB pension plan. It is shown that the incidence of DC pensions in Japanese corporations sharply
contrasts with the American situation.
The third paper shows that securities analysts' forecasts are less accurate and less in agreement
for firms with long-established relationships with banks. The bank-firm relationship is part of theold-fashioned Japanese style of management, but it can still influence information environment forinvestors.
The fourth paper provides results of empirical tests, showing that firms with higher management
ownership in financially distressed conditions may show a higher likelihood that their management
will invest in risky projects, by which the management can shift risk concerning their wealth fromthemselves to creditors. This basic hypothesis, derived from the Jensen-Meckling paper, was tested
empirically under the economic conditions of the former Japanese Corporate Reorganization Law,
which provided a unique opportunity to test it.
The fifth paper shows that securities analysts' earnings forecasts issued after the announcementsof management forecasts are more accurate than the management forecasts. In addition, he finds thatinvestors tend to respond more strongly to analyst forecasts than to management forecasts only when
the analysts provide more accurate forecasts than the managers, as if they realize in advance the bias
in both forecasts. These results suggest that financial analysts play an important role as informationintermediaries even in Japan where corporate managers disseminate future-oriented information.
A recent problem in accounting - the adoption of IFRS - is discussed by two Japanese
researchers in the sixth and seventh papers. The two researchers indirectly oppose the introductionof IFRS to Japan. Under the ecological framework of accounting, we can recognize diversity ofaccounting development in different countries. Thus, the Japanese accounting system should notconverge to IFRS, based on Anglo-American accounting thought. According to the seventh paper,
the balance sheet approach does not enhance the usefulness of accounting information, so we shouldhave more discussion about the introduction of IFRS to Japan.

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Changes in members
Since the publication of Volume 1, Professor Theodore Mock has joined the Advisory Board
and Professor Fumiko Takeda became one of the members of Associate Editors. Professor Suda
contributed to the launch of TJAR and was a member of the Associate Editors' Board. Sadly, hepassed away. We remember him with gratitude.
December, 2012
Hidetoshi Yamaji
The Japanese Accounting Review, Editor in chief