I know all my recent posts seem to be arising from my PhD seminar.  But hey, putting together materials for an introductory seminar makes one think about some basic research issues.

One paper I assign is the Watts and Zimmerman excuses paper.  In case you are unfamiliar with the paper, I view it as presenting a demand-supply model of normative accounting research.  Accounting theorists could offer new insights about “better” accounting practices ex ante, and then auditors and preparers would adopt those practices.  However, the paper dismisses this model and instead offers a model whereby an increase in regulation leads special interests groups to demand “theory” that would support the accounting that they prefer.  The paper discusses some historical evidence that suggests theory lags regulation and practice, which is more supportive of the latter model.  Thus the premise of the paper – accounting theory arises from a market for excuses.

Here are the questions I posed in the seminar – the excuses paper was written when a lot of the journals were publishing normative work.  Now, most top journals are publishing positive research, or should I say, positive research with a paragraph or two of implications that might sound a bit normative.

1) Would the excuses theory predict that top researchers would shift from normative to positive?  Was this a shift in demand (or supply) for excuses?  Or was this a paradigm shift so that excuses are no longer a first order determinant of our research?

2) If the authors were to write the paper today, would the title be – “The Demand for and Supply of Empirical Accounting Research: The Market for Excuses”?  Or are the findings from empirical research sufficiently positive that they cannot be labeled as excuses?

I am sorry to say that neither the students nor the instructor in my seminar had very good answers to these questions.  Can anyone help me out?