THE INFLUENCE OF POLITICAL COMPETITION ON THE DECISION TO ADOPT GAAP

Previous accounting studies have examined the influence of economic incentives on governmental decisions to provide financial monitoring information to the public. Several of these studies have explored the influence of political competition with mixed findings. This study examines more closely the influence of political competition on government accounting choice, testing the implied hypothesis of earlier studies that all forms of political competition have a positive influence on a government's decision to adopt generally accepted accounting principles. Three forms of political competition are investigated: electoral competition, parliamentary competition, and interest group competition. The evidence presented in this paper suggests that all of these forms of political competition are positively related to a state government's decision to adopt generally accepted accounting principles. This paper reconciles the seemingly conflicting evidence related to the influence of political competition on the nature of financial information provided to the public. © 1991.