academic English 代写,专业代写academic English The Psychological Attraction Approach to
Accounting and Disclosure Policy*
DAVID HIRSHLEIFER, University of California, Irvine
SIEW HONG TEOH, University of California, Irvine
1.academic English 代写,专业代写academic English
Much existing positive research on accounting rules and regulation focuses on the
benefits of existing rules to rational users, or else to regulation as a result of the battle
between rational competing interest groups. Such research has made important
advances. However, psychological forces affect individual and group behavior in
many contexts. So we argue that to capture important features of accounting, we
must go beyond the assumption of perfect rationality.
We introduce here the psychological attraction approach to accounting and
disclosure rules, regulation, and policy, and suggest that it offers a program for
positive accounting research. The psychological attraction approach holds that
heuristics and biases in judgments and decisions have shaped and continue to
shape accounting rules and policy. Existing research in behavioral economics and
finance has studied the design of policies and regulation to help individuals who
are subject to psychological bias make better decisions (see, e.g., Sunstein and
Thaler 2003; Camerer, Issacharoff, Loewenstein, O'Donoghue, and Rabin 2003).
A further nascent direction explores how psychological bias of political participants
causes dysfunctional financial regulation (Hirshleifer 2008; Daniel, Hirshleifer,
and Teoh 2002).
We propose that psychology shapes accounting rules and policy in two very
1. Good rules for bad users: Rules and policies that provide information in a
form that is helpful for users who are subject to bias and cognitive processing
2. academic English 代写,专业代写academic English .
In (1), good rules for bad users, users are psychologically attracted to bad
ways of using public information, such as placing incorrect weights on different
* Accepted by Michel Magnan. An earlier version of this paper was presented at the 2008 Contempor-
ary Accounting Research Conference, generously supported by the Canadian Institute of Char-
tered Accountants. An earlier version of these ideas was presented at the Workshop in Psychology
and Capital Markets at the Paul Merage School of Business, University of California, Irvine. We
thank Lucille Faurel, Charles Shi, CAR conference participants, and Michel Magnan (editor) for
very helpful comments, and especially Mort Pincus for insightful reactions to our early ideas.
Contemporary Accounting Research Vol. 26 No. 4 (Winter 2009) pp. 1067-90 © CAAA
doi:10.1506/car.26.4.31068 Contemporary Accounting Research
signals or, in the extreme, completing neglecting an important signal. This creates
an opening for policies designed to guide users toward better judgments and deci-
sions. The demand for such policies could come from users, if, in their better
moments, they understand that some forms of reporting and disclosure will entice
them into error. Alternatively, it could be experts who design policies helpful to users.
In either case, a cause of accounting rules and policy is the attempt to help inves-
tors make the most of their capabilities and circumvent their cognitive limitations.
In (2), bad rules, heuristics and biases make some forms of regulation and policy
irrationally psychologically appealing — regardless of the benefits to users. Further-
more, to the extent that users form biased perceptions in response to accounting
information, other market players may have an incentive to institute accounting rules
and policies precisely to incite and exploit misperceptions.
However, it is not just managers, accountants, and regulators who design rules.
Users are important indirect designers, because managers who need to raise capital
are pressured to report or disclose in forms that are appealing to them. The biases
of users therefore have shaped the historical development of accounting and disclo-
sure policy, just as the perceptions and cognitive capacities of insect pollinators
have shaped the evolution of scent and coloration of flowering plants. (Accounting
rules as flowers is a rare simile — savor it.)academic English 代写,专业代写academic English