The Public Interest Perspective in Financial Accounting Research

Abstract

　Research in financial accounting concerning financial reporting for investor protection contributes to the public good beyond safeguarding the private interests of existing and potential shareholders and creditors in the following ways. Normative research, through presenting foundational concepts and deducing accounting treatment methods, aids in the formation of accounting standards that enhance stakeholder understanding and willingness to comply, working in tandem with the due process of accounting standard-setting bodies. On the other hand, positive research, exemplified by value-relevance studies, promotes market efficiency and increases investors’ willingness to participate in the market by revealing accounting information and investment strategies that are insufficiently reflected in stock prices, thereby inducing discretionary trading. This, in turn, promotes desirable capital allocation across the broader economy and society.