Private interest theory of accounting regulation

The cost-benefit analysis for a new regulation is done in the following manner: The interest paid on these bonds is much less than the rate of return on private capital, though the interest rate on bonds also varies over time and across countries.

Advantages of economic interest theory The industry concerned is allowed to make its own rules and regulations. This may create greater profits to some industries than others M. With this development, the regulator becomes more susceptible to regulatory capture. Regulations seem to favor the consumers rather than the industry.

The theory suggests that producers can organize themselves more readily than consumers. The regulatory body is to serve the interest of the society as a whole rather than making laws in favor of the regulators.

These are several groups and they have conflict with each other. Cowen said cost benefit analysis is applied to regulatory reforms finds net economic value of a new regulation. However, over time, the focus of government and public attention turn to other issues, removing the spotlight from the activities of the regulator.

The industry sets the regulations for the benefit of its members J. The theory suggests that over a given period of time regulations serve the interests of the industries concerned. They reported average willingness to pay for a lottery ticket is four times less than the willingness to be paid for the same ticket.

The government represents the supply side while the interest groups represent the demand side of the argument.

The cost-benefit analysis would differ country to country if standard economic theory is applied. With reference to the public interest theory it is a rationale decision to introduce the legislation which mandates for the corporate to disclose the impact of their activities on the society and environment and also disclose the initiatives taken by them to protect the society and the environment from the adverse impact of their activities.

PUBLIC INTEREST THEORY

Differences between capture theory economic interest theory private interest theory and capture theory The capture theory suggests that regulations are designed to fit the demands of those affected by them.

The determination of the discount rate is ambiguous and the policies with long run effect need an appropriate discount rate. Differences between capture theory economic interest theory private interest theory and capture theory The capture theory suggests that regulations are designed to fit the demands of those affected by them.

Public interest theory

The industry sets the regulations for the benefit of its members J. While there is no pointed origin or categorical articulation of this theory, its notions can be traced back to works of Arthur Cecil Pigou ; [5] related to his analysis of externalities and welfare economics.

Benson, The economic theory of regulation as an explanation of policies toward bank merges and holding company acquisitions,pg European Journal of Law and Economics.

For instance, regulation of the insurance industry requires the expertise of working of banking industry and agencies working for education industry need expertise in how this industry works.

Stigler, The Theory of economic regulation, n. The option value is also a complication in cost-benefit analysis. For example, the policy to have uniform prices for basic items created more advantage to some groups than to others.

While there is no pointed origin or categorical articulation of this theory, its notions can be traced back to works of Arthur Cecil Pigou ; [5] related to his analysis of externalities and welfare economics.

The government represents the supply side while the interest groups represent the demand side of the argument. Based on whether the regulator replaces the decision maker that it has the power to appoint, we draw inferences about what theory can best explain the behavior of the regulator.

It also operates these regulations and there are no external mechanisms involved. The theory suggests that the representative groups in the government decision making should be small in size so as to reduce the running costs. The theory allows political decision making concerning the industry to be done by the industry instead of an individual.

There are many methods of finding a discount rate but two methods which are most used are: For assessing the legislation the government can conduct a survey before introducing it and also put the survey results on the website. But you can order it from our service and receive complete high-quality custom paper.

Now when corporate are disclosing only financial performance of organizations but they are disclosing other non financial but relevant information such as environmental and social impact of the organizations activities, initiatives of the organizations to improve the undesirable impact of their activities on the society and environment.

Public interest theory

The politicians are not predictable since they put regulations for their own advantage. The benefits may be negative or positive.We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads.

You can change your ad preferences anytime. Private interest theory is the main regulatory theory which emphasises the need for standard setters to intervene because of market inefficiencies and inability to self regulate. Private Interest or (economic Interest theory) is based on an assumption similar to PAT that individuals seek to act in their own self interest%(1).

Regulations are understood to do good to the whole society rather than any individual’s interest. The regulatory body is to serve the interest of the society as a whole rather than making laws in favor of the regulators.

Stigler ()’s public choice theory is contrasted with Pigou ()’ public interest theory. THEORIES OF REGULATION There are three theories of regulation: public interest theory regulatory capture theory private interest theory 7 8. Financial Accounting Theory Introduction The aim of this paper is to consider three theories of regulation, the public interest theory, the capture theory and the economic interest theory These three theories attempt to explain why a particular phenomena in the regulation process occurs and as such they are positive theories.

Public Interest Theory is a part of welfare economics and emphasizes that regulation should maximize social welfare and that regulation is the result of a cost/benefit analysis done to determine if the cost to improve the operation of the market outweighs the amount of increased social welfare.

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Private interest theory of accounting regulation
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