Date of this Version


Document Type

Discussion Paper

Publication Details

Keith Duncan (1992) Income Strategies of Listed and Unlisted Companies: An Empirical Study of Accounting Method Choices

Acknowledgments: Earlier versions of this paper have benefited from comments made by Jim Manegold, Ken Fenis, Ken Moores, Ted Mock, participants at the ANZAME Conference (Sydney, 1987) and anonymous reviewers. This paper was started while the author was at the University of Otago and developed from preliminary work with Deborah Russell. Partial funding was provided by an Otago Research Grant.

School of Business Discussion Paper ; No. 33, Jun. 1992

© Copyright Keith Duncan and the School of Business, Bond University


This paper explores whether the political and contracting environments for listed and unlisted companies gives rise to different wealth incentives for management to judiciously select a portfolio of accounting procedures for the firm. The analysis indicates significant differences in the method choices made by the managers of listed and unlisted firms. For the listed firms, size as a proxy for political costs is negatively related to portfolio choice, supporting the political cost hypothesis. In addition, leverage and directors' percentage ownership are positively related to portfolio choice and thus support the debt contracting cost hypothesis. In contrast, none of the contracting or political cost variables are significantly related to the choice of accounting method portfolio by unlisted firms. Overall the evidence provides some support for the positive accounting hypothesis that firms choose income strategies.

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Accounting Commons