preview

Danshui Essay

Better Essays

The Australasian Accounting Business & Finance Journal, February 2007 Gaffikin: Accounting Research and Theory: the age of neo-empiricism. Vol. 1, No.1.pp. 1-19.

Accounting Research and Theory: The age of neo-empiricism
Michael Gaffikin, School of Accounting & Finance, University of Wollongong

ABSTRACT The theorising in accounting prior to 1970 was rejected as not providing sufficiently general theories. Informed by theories in economics and finance (and other disciplines such as psychology) and with the aid of computers, attempts to theorise accounting took a new direction. Large data collection and analysis emphasized a purportedly more systematic empirical approach to developing theory. Key words: accounting; neo-empiricism; …show more content…

As mentioned, the dominating characteristic was empiricism. It is “neo” (new) because, although earlier research had relied on empiricism in that it sought to establish “theory” from best practice, the emphasis after 1970 was on a more systematic use of empirical evidence. This was largely made possible with the availability of large financial databases to which sophisticated statistical techniques were applied to test hypotheses. This, in turn, was greatly facilitated by the increasing availability and use of computers.

1

The Australasian Accounting Business & Finance Journal, February 2007 Gaffikin: Accounting Research and Theory: the age of neo-empiricism. Vol. 1, No.1. pp. 1-17.

All neo-empirical accounting research has the underlying assumption of the efficiency of markets – the efficient markets hypothesis (EMH). It is referred to as an “hypothesis” because despite more than forty years of research designed to test the hypothesis all attempts to date have failed to confirm it. Therefore, consistent with the generally accepted process of theory construction which states (simply) that a theory is a confirmed hypothesis, it remains an hypothesis. The EMH emerged in the 1960s from the work of researchers at the University of Chicago trained in economics and finance and working in the areas known as portfolio theory and employing the capital assets pricing model (CAPM). It was then taken up by accountants also working and studying at the University of

Get Access