In this study we examine the consistency between lobbying choices and insider trading behaviour by managers before and after the issuance of the 1974 FASB Exposure Draft on R&D. The results, though not very strong, indicate that managers compensated by accounting-based schemes lobbied against the FASB 1974 Exposure Draft on R&D and sold the shares of their firms, while managers compensated by market-based schemes lobbied for and bought shares of their firms. These results provide additional evidence that managers' lobbying choice can act as a surrogate for their beliefs as reflected in their insider trading behaviour.
Amershi, A.H., J.S. Demski and M. A. Wolfson, 1982, Strategic behavior and regulation research in accounting, Journal of Accounting and Public Policy, 1, 1, 19–32.
2.
Basel, J.B. and G.R. Stein, 1979, The value of infor Mation: inferences from the probability of insider trading, Journal of Financial and Quantitative Analysis, 14, 3, 553–571.
3.
Collins, D.W., M.S. Rozeff, and D.S. Dhaliwal, 1981, The economic determinants of market reaction to proposed mandatory accounting changes in the oil and gas industry: a cross sectional analysis, Journal of Accounting and Economics, 3, 1, 37–71.
4.
Daley, L.A. and R.L. Vigeland, 1983, The effects of debt covenants and political costs on the choice of accounting methods: the case of R&D, Journal of Accounting and Economics, 5, 3, 195–211.
5.
Deakin, E.B., 1989, Rational economic behavior and lobbying on accounting issues: evidence from the oil and gas industry, Accounting Review, 64, 1, 137–151.
6.
Dukes, R.E., T.R. Dyckman, and J.A. Elliot, 1980, Accounting for research and development costs: the impact on research and development expenditures, Journal of Accounting Research, 18, Supplement, 1–26.
7.
Elliot, J. A., G. Richardson, T.R. Dyckman, and R.E. Dukes, 1984, The impact of SFAS No.2 on firm expenditures on research and development: replications and extensions, Journal of Accounting Research, 22, 1, 85–102.
8.
Feroz, E.H., 1987, Corporate demands and changes in GPLA, Journal of Business Finance and Accounting, 14, 3, 409–424.
9.
Finnerty, J.E., 1976, Insider's activity and insider infor Mation: a multivariate analysis, Journal of Financial and Quantitative Analysis, 11, 2, 205–215.
10.
Hanushek, E.A. and J.E. Jackson, 1977, Statistical Method for Social Scientists (New York, N. Y., Academic Press).
11.
Healy, P., 1985, The effects of bonus schemes on accounting decisions, Journal of Accounting and Economics, 7, 1–3, 85–107.
12.
Horowitz, B.N. and R. Kolodny, 1980, The economic effects on industry unifor Mity in the financial reporting of R & D expenditures, Journal of Accounting Research, 18, Supplement, 38–74.
13.
Jaffe, J.F., 1974, Special infor Mation and insider trading, Journal of Business, 47, 3, 410–428.
14.
Johnston, J., 1972, Econometric Methods (New York, N.Y., McGraw-Hill), 2nd Edition.
15.
King, R.D. and T.B. O'Keefe, 1986, Lobbying activities and insider trading, The Accounting Review, 61, 1, 76–79.
16.
Larcker, D.F. and L. Revsine, 1983, The oil and gas accounting controversy: an analysis of economic consequences, Accounting Review, 58, 4, 706–732.
17.
Larcker, D.F., R.E. Reder and D.T. Simon, 1983, Trades by insiders and mandated accounting standards. Accounting Review, 58, 3, 606–620
18.
Leftwich, R., 1981, Evidence of the impact of mandatory changes in accounting principles on corporate loan agreements, Journal of Accounting and Economics, 3, 1, 3–36.
19.
Noreen, E., 1988, An empirical comparison of PROBIT and OLS regression hypothesis tests, Journal of Accounting Research, 26, 1, 119–133.
20.
Smith, C. and R. Watts, 1982, Incentive and tax effects of executive compensation plan, Australian Journal of Management, 7, 2, 139–152.
21.
Vigeland, R.L., 1981, The market reaction to Statement of Financial Accounting Standards No.2, Accounting Review, 56, 2, 309–325.
22.
Watts, R. and J. Zimmerman, 1986, Positive Accounting Theory (Englewood Cliffs, N. J., Prentice Hall).
23.
Watts, R. and J. Zimmerman, 1978, Toward a positive theory of determination of accounting standards, Accounting Review, 53, 1, 112–134.
24.
Zmijewski, M. and R. Hagerman, 1981, An income strategy approach to the positive theory of accounting standard setting/choice, Journal of Accounting and Economics, 3, 1, 129–149.
