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3920496
Watts & Zimmerman's Positive Accounting Theory
Description
6 Accounting Mind Map on Watts & Zimmerman's Positive Accounting Theory, created by yvonne.y.tang on 31/10/2015.
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accounting
accounting
6
Mind Map by
yvonne.y.tang
, updated more than 1 year ago
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Created by
yvonne.y.tang
about 9 years ago
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Resource summary
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
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)
Debtholders
relationship governed by
Debt Covenant
leading to Hypothesis 2: Debt Covenant (Sweeny Study, 1994)
Politicans, Media, etc.
relationship influenced by
Informal Contract
leading to Hypothesis 3: Political Costs (Jones Study)
who can behave Opportunistically
who determine Financial Statement Variables (e.g. Profit Figure)
by using Generally Accepted Accounting Principles, which provide a Restricted Choice
makes no attempt to Guide (which is Normative Theory)
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