Rules-based accounting standards and litigation

Dain C. Donelson, John M. McInnis, Richard D. Mergenthaler

Research output: Contribution to journalArticlepeer-review

59 Scopus citations

Abstract

Some claim that rules-based accounting standards shield firms from litigation, while others argue that violations of detailed rules give plaintiffs a "roadmap" to successful litigation. We inform this debate by investigating whether rules-based standards are associated with the incidence and outcome of securities class action litigation. Overall, our results suggest that rules-based standards are associated with a lower incidence of litigation but are not associated with litigation outcomes. These results are of interest in the debate regarding the switch from a more rules-based U.S. GAAP to a more principles-based IFRS.

Original languageEnglish (US)
Pages (from-to)1247-1279
Number of pages33
JournalAccounting Review
Volume87
Issue number4
DOIs
StatePublished - Jul 2012

All Science Journal Classification (ASJC) codes

  • Accounting
  • Finance
  • Economics and Econometrics

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