Why politicians actively intervene in accounting regulation
Regulation, and especially a technical issue such as financial accounting, is often considered a matter for bureaucrats, not for politicians. In doing so, we tend to neglect that many accounting rules have real economic or social consequences. For example, accounting rules for stock option plans directly affect how companies compensate their management. Similarly, the accounting valuation of bank assets affects regulatory capital. Less restrictive requirements for loss recognition thus reduce the likelihood of bank bailouts. In the paper “Why Do Politicians Intervene in Accounting Regulation? The Role of Ideology and Special Interests”, we systematically reviewed public speeches by all…
