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Published work Verma, S. and Gray, S.J. (2006) Development of Company Law in India : The . Case of the Companies Act 1956. Working Paper. Department of Management Studies, University of York, York.
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University of York Department of Management Studies Working Paper 18 February 2006
ISSN Number: 1743-4041
Development of Company Law in India: The Case of the Companies Act 1956 Shraddha Verma Department of Management Studies Sid J. Gray University of Sydney
This paper is circulated for discussion purposes only and its contents should be considered preliminary.
The influence of culture and politics on the promulgation of accounting regulations in the Companies Act 1956 in India immediately post independence is analysed using an exploratory framework based on the work of McKinnon (1986) and Gray (1988). Within the framework, the process of change is analysed into three phases, a source phase, diffusion phase and reaction phase with all phases of change being influenced by intra-system activity, trans-system activity and the social and cultural context of India. In particular, the importance of the role of the Government within the process of accounting change is seen and the social context is seen to influence both the need for change and the process of change.
culture, politics, accounting change, India, company law
Development of Company Law in India: The Case of the Companies Act 1956 Introduction Within the international accounting literature, culture has been identified as an important influence on the process of accounting change and the need for studies which investigate the influence on accounting change in different cultural contexts has been discussed (Gray 1983; Samuels and Piper 1985; Mckinnon 1986; Bindon and Gernon 1987; Meek and Saudagaran 1990; Wallace and Gernon 1991). In this paper, the influence of the social, economic and cultural context on the choice of regulatory mechanisms and on the process of accounting regulatory change is analysed using an exploratoty framework based on the work of Gray (1988) and McKinnon (1986). This framework is outlined in the next section and applied to the promulgation of the Indian Companies Act 1956. The notion of culture used in this article is taken from the anthropological literature. Kuper (2000) identifies some general agreement on the concept of culture, namely that it is not a matter of race, it is learned, is essentially about ideas and values, and can be described as a symbolic system. Culture is complex and can only partially explain why people think and behave as they do and other factors such as political and economic forces must also be considered (Kuper, 2000). Recognising the limitations, subjectivities and complexities within the notion of culture used in this paper, culture is analysed in terms of its main values and is seen to both influence social, political and economics institutions and, in turn, be influenced by these institutions. In addition, accounting is seen to be influenced by politics in two main senses. The first is with the involvement of government (either implicitly or explicitly) in accounting regulation and accounting change and the second is with accounting regulation and accounting change being the outcome of the interactions of all parties interested in and affected by accounting. These political pressures arise for two
reasons. Firstly because the outcome of accounting practices often having significant economic consequences for the preparers and users of accounting reports and secondly because accounting is seen as a useful tool for economic and social management (Zeff, 1972, 1978; Burchell, Clubb and Hopwood,...
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