Accounting Methods and Management Decisions: The Case of Inventory Costing and Inventory Policy

Abstract

Considerable attention in the accounting literature is devoted to dis- cussing possible motives for and effects of choices among alternative accounting methods. Although insights have been gained into investor (stock market) reactions to changes in accounting methods, little is known about either management motivations for observed accounting choices or the effects of these choices on subsequent operating decisions. One explanation for the dearth of empirical findings is that few of the proposed theories of accounting choice have offered strong links to real economic incentives. In addition, previous studies have concentrated on firm characteristics existing before and concurrent wit..