Does Study of the Information Content of Profits Announcements Explain Why Firms Use Particular Accounting Practice? Does It Help to Predict Which Firms Will Use Particular Accounting Practices?

Topics: Economics, Fundamental analysis, Financial economics Pages: 30 (10618 words) Published: August 27, 2013
Australasian Accounting Business and Finance Journal
Volume 1 Australasian Accounting Business and Finance Journal Issue 1 Australasian Accounting Business and Finance Journal Article 1

Accounting Research and Theory: The age of neoempiricism
M. Gaffikin
University of Wollongong, gaffikin@uow.edu.au

Follow this and additional works at: http://ro.uow.edu.au/aabfj Copyright ©2007 Australasian Accounting Business and Finance Journal and Authors. Recommended Citation Gaffikin, M., Accounting Research and Theory: The age of neo-empiricism, Australasian Accounting Business and Finance Journal, 1(1), 2007. Available at:http://ro.uow.edu.au/aabfj/vol1/iss1/1 Research Online is the open access institutional repository for the University of Wollongong. For further information contact the UOW Library: research-pubs@uow.edu.au

Accounting Research and Theory: The age of neo-empiricism
Abstract

The theorising in accounting prior to 1970 was rejected as not providing sufficiently general theories. Informed by theories in economics and finance (and other disciplines such as psychology) and with the aid of computers, attempts to theorise accounting took a new direction. Large data collection and analysis emphasized a purportedly more systematic empirical approach to developing theory. Keywords

accounting, neo-empiricism, capital markets research, behavioural finance, efficient

This journal article is available in Australasian Accounting Business and Finance Journal: http://ro.uow.edu.au/aabfj/vol1/iss1/1

The Australasian Accounting Business & Finance Journal, February 2007 Gaffikin: Accounting Research and Theory: the age of neo-empiricism. Vol. 1, No.1.pp. 1-19.

Accounting Research and Theory: The age of neo-empiricism
Michael Gaffikin, School of Accounting & Finance, University of Wollongong

ABSTRACT The theorising in accounting prior to 1970 was rejected as not providing sufficiently general theories. Informed by theories in economics and finance (and other disciplines such as psychology) and with the aid of computers, attempts to theorise accounting took a new direction. Large data collection and analysis emphasized a purportedly more systematic empirical approach to developing theory. Key words: accounting; neo-empiricism; capital markets research; behavioural finance; efficient markets hypothesis; positive accounting theory

INTRODUCTION Around 1970 there was a dramatic change in the approach to accounting research. Several reasons have been suggested for this change in methodological direction by those reviewing the development of accounting thought. To many, a major distinction is a change in direction away from attempts to prescribe a theory of accounting to developing theory from a description of extant practices. To advocates of the latter, previous attempts to develop a theory of accounting were futile as there could never be agreement over many of the inputs into a theory such as the postulates, principles but most specifically the assumptions. Although a very inaccurate description the two approaches are labelled normative (the prescriptive theories that dominated prior to 1970) and positive (the descriptive research that has dominated mainstream accounting research since 1970). With its emphasis on description, the most defining characteristic of mainstream research since 1970 is its commitment to empiricism. In their book on accounting theory, Henderson, Peirson and Brown (1992) refer to this research as neo-empirical research: a most apt nomenclature. As mentioned, the dominating characteristic was empiricism. It is “neo” (new) because, although earlier research had relied on empiricism in that it sought to establish “theory” from best practice, the emphasis after 1970 was on a more systematic use of empirical evidence. This was largely made possible with the availability of large financial databases to which sophisticated statistical techniques were applied to test hypotheses. This, in...

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