Decoupled earnings: An institutional perspective of the consequences of maximizing shareholder value

Kenneth Wm. Kury

Accounting Forum, 2007, vol. 31, issue 4, 370-383

Abstract: Recent accounting scandals have brought focus on the role of management in financial statement manipulation. This focus on micro-behavior does not capture the complexities of earnings management. Taking an institutional rather than agency theory approach, earnings management is posited as a decoupled behavior. A behavior that results from not only agency-based motivations of self-interests, but also regulative, normative, and cultural-cognitive legitimacy pressures. Conformity to the central logic of “maximizing shareholder value” found in the “US financial market” institutional field provides the context in which to explore earnings management as a decoupled behavior. Insights for earnings management include the blending of agency and institutional theory perspectives to gain a more complete understanding of the behavior and the positing of a continuum of earnings management conducive to this merger. Institutional theory benefits from exploring the nesting in multiple institutional fields.

Date: 2007
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DOI: 10.1016/j.accfor.2007.09.003

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