GAAP AS A SYMBOL OF LEGITIMACY - NEW-YORK STATES DECISION TO ADOPT GENERALLY ACCEPTED ACCOUNTING PRINCIPLES

In this paper, we draw on economic and sociological theories in order to explain public sector incentives to adopt generally accepted accounting principles (GAAP), using the state of New York's decision to adopt GAAP for external financial reporting. we argue that the state's decision to adopt GAAP was an attempt to regain legitimacy for the state's financial management practices. Institutional interests demanding New York use GAAP were part of the sociological phenomenon called institutional isomorphism. Power relations and organizational politics related tot the state's budgetary process also significantly influenced the state's decision to adopt GAAP. However, although professional elites made strong statements that GAAP adoption would improve the state's financial management practices, we found no compelling evidence that producing GAAP financial information has significantly altered the state's financial management practices.