methodological gaps that remain.
It is to be noted that PAT has been subject to various criticisms since its emergence. For example, Chambers (1993) called the advocates of PAT as PA cult. Sterling (1990) criticizes PAT on the ground that it restricts itself to the positive study of accounting practice and accounting practitioners and hinders accounting progress by neglecting the need for the assessment of accounting practice. Sterling (1990) further assesses its potential accomplishment as being nil. Whittington (1987) criticizes PAT for its methodological intolerance and asserts that normative accounting theory has a legitimate place in accounting. Neu (1997) provides a largely negative appraisal of PAT. Sue (1997) says that that PAT narrows the researchers’ focus. Hall (1997), on the other hand, disagrees with Sterling’s (1990) assessment that the potential contribution of PAT is nil. Deegan (1997) examines how PAT has ignited emotions among academics. It attracted many academics and alienated some at the same time. Milne (2002) judges PAT’s attempt to explain an entity’s social disclosures as failure.
This paper focuses mainly on W & Z’s 1986 book and 1990 paper and the empirical accounting literature of accounting choices. The first two sources contain some methodological discussion by the two protagonists of PAT and the empirical accounting literature is surveyed to determine how it developed during the last four decades.
This paper discusses three interrelated methodological issues: (a) how PAT progressed over time, (b) role of counterevidence/anomalies in PAT, and (c) how a theory is to be chosen from among competing theories. These three issues are chosen because, as mentioned above, Popper (1959), Kuhn (1996) and Lakatos (1970) do not give the same account of these issues.
2. Development of PAT
PAT started with examining some assumptions underlying normative accounting prescriptions during the 1960s. Two sets of empirical studies2 were conducted. One set of studies (e.g., Ball and Brown, 1968; Beaver, 1968; Foster, 1977; Beaver, Clarke and Wright, 1979; Beaver, Lambert and Morse, 1980; Grant, 1980; McNichols and Manegold, 1983) examines 本文来自辣^文~论-文.网原文请找腾讯324'9114 , etc.) relevant to stock valuation. This, according to W & Z (1986), undermined the claim in normative accounting literature that accounting earnings numbers are meaningless because they are computed using multiple valuation bases. The second set of studies (e.g., Kaplan and Roll, 1972; Sunder, 1973, 1975; Ricks, 1982; Biddle and Lindahl, 1982) attempts to discriminate between two competing hypotheses- the no-effects hypothesis and the mechanistic hypothesis.3 Evidence in these studies is mixed and could not successfully discriminate between the competing hypotheses.
The above sets of studies have used the Efficient Market Hypothesis (EMH) and the Capital Asset Pricing Model (CAPM) as their underlying foundation. Furthermore, it was assumed that contracting costs4 were zero. Overall, these studies raised doubts about the empirical descriptiveness of the following assumptions underlying normative prescriptions during the 1960s: (a) there is only one source of information about a company, (b) earnings numbers are useless because they were not prepared according to a single basis, and (c) it is possible to mislead the stock market by manipulating the earnings number through accounting choices. Information content studies reveal that these assumptions are unlikely to be descriptive of the real world. The EMH implies that there is competition for information. There are alternative sources of information about the firm such as information releases by management, interviews of corporate personnel by analysts, etc. The observed association between unexpected earnings and abnormal rate of return reveals that earnings number reflects factors relevant to the valuation of stock despite not being calculated on a single basis. Furthermore, the believers in EMH and CAPM argued that it is not possible to systematically mislead the market by accounting changes. The market differentiates between accounting changes having cash flow effects and changes with no cash flow effects. Thus, the mechanistic hypothesis was unlikely to be descriptive of the real world.
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