DOCTORAL RESEARCH
Maureen H. Berry, Editor
UNIVERSITY OF ILLINOIS
The process of economic development, and the multitude of problems it can provoke, provides a rich field for doctoral research in many disciplines. The current selection of dissertations, which also includes studies involving relatively recent accounting and reporting innovations, illustrates the different perspectives that can illuminate various aspects of the same object of interest.
Lister’s dissertation, examining banking’s role in the early devel-opment of California, gives the lead. This study, using bank balance sheets for its statistical data base, shows some of the symbiotic relationships which link accounting and economic history. A second economic historian, Ababio-Appah, looking into development issues in Ghana a century later, considers the impact of ownership concepts on economic progress. What, he asks, are the implications of attempting to move away from the basic national philosophy of collective ownership? Agbonyitor is also concerned with development problems in Ghana: but from the standpoint of public financial management. Constant difficulties over state budget deficits result from recurring expenditure allocations. Thus, the study concentrates on examining expenditure patterns in order to illuminate policy issues. Budget deficits constitute the focus of Shelley’s research into the fiscal problems of American cities. Finding that fiscal stress could not be linked to financial and economic indicators, she concluded that the predominant role has to be conceded to political considerations.
Shifting from macro to micro issues of financial distress, Elkharouf tests the assumption that the international harmonization of accounting standards could improve decision making. After the extremely time-consuming exercise of restating U.S. financial state-ments in accordance with the French unified accounting system, he concluded finally that any resulting improvements in predictive ability were not statistically significant. A second relatively new accounting phenomenon concerns price-level changes. Fesmire’s study puts Sweeney’s classic work in historical perspective, high-lighting his major contributions to current practice.
Social responsibility accounting (SRA) in U.S. corporations has attracted interest among academics in Poland, where this concept is differently interpreted. Jaglinska-Bieniek, in her study of SRA in selected U.S. companies, identified certain development barriers and offered suggestions for their removal.
Bernstein’s study of U.S. corporations returns to the field of eco-nomic history and moves back in time to the Great Depression. He breaks research ground by asking: “Why did the depression last so long?” rather than “why did it happen?”. We conclude with Fiereder’s dissertation which opens with events taking place in Europe just as the Great Depression in the U.S. was in its final phase. The public sector then began to dominate the German mining industry, and as a result, a former state enterprise formed the nucleus of a successful postwar-Austrian mining and manu-facturing group.
Bank Behavior, Regulation and Economic Development: California 1860-1910 by Roger Charles Lister. University of California, Davis, 1982, 344 pp. Vol. 43/07, p. 2411-A.* Lister’s research examines the role of banking in the process of economic development. California’s experience during the period 1860 to 1910 was considered to be a particularly appropriate setting for this type of study because of the state’s rapid economic growth at that time, accompanied by relatively few restrictions on banking operations.
The pattern of expansion by national banks in California was very similar to the process taking place in the eastern part of the country. That is, there was very slow growth before the turn of the century, due to the entrenched position of state banks and a general lack of confidence in bank notes. As the popularity of state banks declined in the early 1900s, national banks grew rapidly: aided by certain tax advantages and reduced minimum capital requirements.
Effective bank regulation depends, of course, not only on the related legislation itself but also on the extent to which it is enforced. In California, certain legal constraints, such as reserve and capital requirements, were offset by relatively flexible supervision. Turning from regulation to banking operations, banking’s main con-tributions to economic development have come from lending activities. Lister used regression analysis in examining bank balance sheet data for the thirty-year period 1878 to 1908 in order to identify important loan-related banking features. His findings suggest that, in general, less funds were made available by those banks which had the most restrictive national charters, poor capitalization, and risk averse management. Two other factors, predictable it would seem, were lack of loan demand from customers, as well as the strength of banking power over the loan market. On the other hand, banks were favorably affected by the existence of rapidly developing loan markets with a low probability of risk.
Another important factor was the competitive advantage afforded by the lack of concentration, and poor performance, of existing banks in the targeted areas. These findings are also viewed as adding to the existing research on the development of a national capital market during this same period. An interrelated issue concerns the existing differences between interest rates in various regions of the country. Other in-vestigations have suggested that these regional interest rate variations could be attributed to a number of factors, including: risk and transaction cost levels, and alternative financial innovations. However, while agreeing that these factors affected banking behavior in California, Lister was unable to find any predominant explanation.
Land Ownership in the Economic Development of Ghana, 1945-1975 by N.W. Ababio-Appah. Lunds Universitet, Sweden, 1981, 215 pp. Vol. 43/01, pp. 20-21-C. During the past three or four decades, Ghana’s economy has, through modernization, gradually shifted away from complete dependence on an unskilled, traditional labor sector. As a part of this process, changes occurred in the system of land ownership. The primary purpose of this study was to in-vestigate the relationship between these changes and the new direction of the economy. In order to identify the dynamics of the basic shift in conventional ownership claims, the dissertation ex-amined several economic theories bearing on property rights. The implications of these theories were analyzed from the standpoint of their application to the agricultural development of land in Ghana. The author defined the term ‘land’ in a very broad sense to include all natural resources wtih possible social or economic value. The concept of ownership was construed, consonant with Ghanaian interpretation, as comprising absolute, collective land-owners as well as state ownership through statutory acquisition.
A secondary goal was to analyze certain problems associated with transforming the economy into a dual relationship between traditional and modern sectors. The modern sector originated, and is still developing, with a predominantly unskilled labor base. Lack of skills has at least two automatic consequences: low output and low wages. Thus the two sectors are linked by a two-way flow of labor. Labor flows into the modern sector but a certain part of this stream has to return home periodically to work on family farms in order to make ends meet. Based on this sectoral framework, the author developed the proposition that a ‘peasant cultivation family unit’ acts as an equilibrium lynch-pin. As might be expected, the process of economic transformation ran into various problems. Probably the most significant challenge to a smooth transition can be attributed to the existing institutions which control the traditional systems of land tenure.
Interaction Between Central Government Recurrent Expenditures, Revenue Constraint and External Receipts in Less Developed Countries—The Case of Ghana: 1956-78 by Alberto Dogbey Kobla Agbonyitor. Boston University Graduate School, 1982, 233 pp. Vol. 43/04, p. 1238-A. This dissertation is essentially concerned with budget deficit problems in developing economies and deals with Ghana as a test case. Its basic assumption is that analysis of re-current expenditure patterns is critical to understanding budget deficit difficulties. The research centered on two main areas of interest: interrelationships between certain selected variables, and the behavior of sectoral allocations. The selected variables were: aggregate recurrent spending, tax revenues, domestic borrowing, and external funding. As for sectoral allocations, governmental activities in Ghana comprise the following functions: general administration, defense, economic services, water, education, health, housing, and welfare.
An economic model of the governmental sector was constructed from statistical data, which included central government budget statements and development plans. Simultaneous equation estimation techniques were used to estimate equations for data analysis; The results of this analysis indicate that revenues and expenditures are jointly determined but that their marginal response is asymmetric. Both revenues and expenditures move directly with external funding. However, recurrent spending was found to be flexible upwards and rigid downwards in response to revenue changes. Because expenditure growth exceeds revenue growth, budget inflation occurs with increases in domestic borrowing because input prices rise.
The various sectors reacted differently to budget expansions
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and contractions. Health, water, and housing were flexible while the other services displayed rigidity. Inelastic response with costs was found in all sectors: with the exception of general adminis-tration and economic services. Consequently, it would not seem feasible to try and reallocate sectoral spending through inflationary financing.
The results of this study could prove valuable for those decision makers actively involved in the governmental budgeting process. The findings not only direct attention to the longer run implications of current spending decisions but also suggest a model for sectoral expenditure plans.
Fiscal Stress in American Cities by Karen Lee Shelley. University of Massachusetts, 1982, 196 pp. Vol. 43/04, p. 1241-A. Fiscal stress, defined as an excess of expenditures over revenues, has become a widespread and characteristic phenomenon in American cities: particularly over the past decade or so. As a result, federal and state governments are seriously considering the possibility of introducing significant changes in public-finance-related policies. However, the development of effective policies to promote urban solvency first requires an understanding of underlying causes and institutional relationships. Shelley, therefore, undertook this study to identify and analyze some of the main contributing factors.
Her basic assumption was that social, economic, and demographic changes are expressed in terms of financial priorities through two sets of connections: the political and the financial systems. By concentrating on the financial linkages, Shelley formulated the null hypothesis that elasticities of revenues and expenditures with respect to city size and residents’ income would not be significantly different between fiscally-stressed and non-fiscally-stressed cities. She gathered data for the seventeen-year period 1961 to 1978 on revenues, expenditures, population, and per capita income for 37 of the largest cities in the United States. The relevant elasticities were estimated through regression analysis. The null hypothesis with respect to differences between the two sets of elasticities was then subjected to the Chow test. This test did not disclose any significant differences and the hypothesis could not therefore be rejected. From her evidence, Shelley concluded that fiscal stress must be attributed primarily to political considerations rather than financial or economic conditions.
A Comparison of the Ability of Financial Ratios Based on Different Accounting Standards to Predict Bankruptcy by Farouk Wasef Elkharouf. University of Illinois at Urbana-Champaign, 1982, 179 pp. Vol. 43/03, p. 847-A. One of the main advantages of harmonizing accounting standards internationally, it has been asserted, is that decision making will be improved when separate sets of financial information, supporting alternative choices, are prepared in similar fashion. This assumption was tested in Elkharouf’s study of the effects of a major change in the accounting system on the predictive ability of financial statements. The specific major change involved restating financial statements, originally prepared in accordance with accounting principles generally accepted in the United States, in accordance with the French unified accounting system. The null hypothesis was that there would be no significant difference in the predictive ability of the two sets of data, that is: the original version and the restated version.
Sixty U.S. firms were sampled, including thirty companies which declared bankruptcy during the period 1970 to 1975. Their financial statements for three consecutive years were restated on the basis of the French unified accounting system. This process resulted in considerably different monetary amounts for a number of items, in particular: depreciation expense, net income, and net worth. These differences were tested for significance, using a one-way analysis of variance. Four sets of multiple linear discriminant functions were created from thirty-one financial ratios for each of the two versions of the financial statements. Differences in the predictive ability of these two sets of data were examined by the chi-square and Wilcoxon matched-pairs signed ranks tests. Overall, the restated data performed slightly better than the original version. While there were some differences in the powers of the models, the multiple linear discriminant functions predicted bankruptcy well. However, due to the lack of statistical significance, the null hypothesis could not be rejected.
A Comparison of the Advocations of Henry Sweeney in “Stabilized Accounting” to Recent Price Level/Replacement Cost Activity by Walker Eugene Fesmire. The University of Mississippi, 1982, 296 pp. Vol. 43/03, p. 847-A. Although Stabilized Accounting is a classic in the field of accounting for price level changes, the full extent of Sweeney’s contributions to current theory and practice has received inadequate understanding and recognition. Fesmire’s dissertation, based on the premise that the recent professional literature leans heavily on Sweeney’s concepts, attempts to fill this need.
First, Sweeney’s work had to be placed in perspective. This required tracing the development of the related literature by reviewing and analyzing the history of arguments for and against recognizing changing prices in the accounts, Sweeney’s views on the use of replacement cost, as well as historical cost/constant dollar, were presented, together with an illustrative example of accounting for changing prices. This analysis served to demonstrate the degree to which later writers were influenced by Sweeney’s thinking. After the publication of Stabilized Accounting, very few major contribu-tions to the price level accounting literature appeared until the 1970s. With the SEC’s issuance of Accounting Series 190, the situation changed significantly as the debate over accounting and reporting theory expanded to cover problems of practical implementation.
The dissertation concludes with three recommendations for the accounting profession. First, that it should continue to assist business in its attempts to improve price level accounting. Second, that ft should continue its own efforts to develop price level accounting and reporting technology. Lastly, that it should engage in wide-spread educational programs aimed at clarifying the objectives and limitations of accounting for changing prices.
Corporate Social Responsibility Accounting in the U.S.A.—Development Barriers by Zuzanna Jaglinska-Bieniek. The University of Lodz, Poland, 1983 (in Polish). This is a study of the theory and practice of social responsibility accounting by U.S. corporations and its main purpose is to identify and evaluate elements barring social accounting’s development. The three main research questions were:
(1) What factors underlie the development of U.S. corporate social responsibility accounting (CSRA)?;
(2) What are its development barriers?; and
(3) How can they be overcome?
The dissertation commences with an historical review of corporate goals and approaches to social responsibility in the United States, drawn from the economics, political science, and sociology literature. Next, links were drawn between CSRA and conventional corporate accounting and three types of CSRA models identified: (1) those consistent with the classical view that CSRA should be a separate and optional supplement to conventional corporate ad-counting; (2) those based on the management concept that total performance measurement requires measuring the costs and benefits of activities involving corporate social responsibility in addition to traditional methods of income measurement; and (3) those based on an activist concept that special measurements, other than market measures, are required to reflect the corporate impact on society as a whole.
In reviewing the practice of CSRA in certain selected U.S. corpo-rations, two basic types of development barriers were identified. The first arises out of the cultural and political foundations of the American economy. This barrier could be removed, at least partially, through appropriate legislation such as took place in France with the requirement of a social balance sheet. The second barrier is directly related to accounting systems and concerns the problem of measuring social costs and benefits. This situation suggests that either new types of accounting models need to be developed or existing ones constantly improved. Such efforts should aim at identifying needs for full information, interdisciplinary measurement of all social costs and benefits, developing and applying accounting information standards, and interdisciplinary auditing of accounting statements.
Long-Term Economic Growth and the Problem of Recovery in American Manufacturing: A Study of the Great Depression in the United States, 1929-1939 by Michael Alan Bernstein. Yale University, 1982, 525 pp. Vol. 43/04, p. 1241-A. Problems associated with the Great Depression in the United States have attracted considerable research interest in many fields over the past four decades. From the standpoint of economics, interest has generally centered on the depression’s origins, with particular focus on the collapse of the security markets in 1929 and the following four years of progressively severe economic downturns. Bernstein’s research moves away from this concentration in order to provide a longitudinal picture. His concern is with the length of the depression years, rather than why they came about
The opening chapters of the dissertation, which provide the theoretical framework, offer a contrast to the traditional thesis associating the depression with general economic stagnation. Bernstein proposes an alternative view, based on data accumulated from studies of twelve major manufacturing industries. Through examination of industry growth rates during the 1930s, it was possible to determine which sectors of the economy were stagnant and which were relatively unaffected. The author was then able to suggest that in a developed capitalist economy there exist long-term growth patterns. These patterns favor industries producing non-durable consumer goods rather than consumer durables or capital goods. This is because firms producing nondurable consumer goods have more flexibility with respect to innovation and sales promotion. However, this relatively successful sector was unable to induce a general upswing in the economy. It could not absorb the unemployed into its work-force or spark production in other industries. This lack of synergy can be associated with various technical and demographic problems as well as the fact that final consumer demand took on a completely different form.
The Reichswerke “Hermann Goering” in Austria from 1938 to 1945. On the History of the Foundation of the United Iron and Steel Company (VOEST) by H. Fiereder. Universitaet Salzburg, Austria, 1979 (in German). Vol. 43/03, pp. 451/2-C. This dissertation, whose topic is aptly described in the title, is in three parts. The initial section traces the development of heavy industry in Germany and Austria up to the year 1938. Included is a review of the relationships between the mining industries and the state and party offices of the Third Empire (Reich). The second part describes the nationalization of the Alpine-Montangesellschaft, formerly part of the Duesseldorf United Steelworks, as a state (Imperial) factory (Reichswerke) in 1938. The closing section deals with the establishment of the foundry in Linz and the modernization of the Alpine company by the Linz state factory.
The creation of the Hermann Goering state factory in 1937 can be attributed to dissensions between the German mining industries and the German state bureaucracy. In accordance with Goering’s plans, and in the face of stiff opposition from the private sector, this enterprise became one of the largest mining industries in the German empire. This was achieved mainly through political and economic coercion by the concern’s management. By 1942, however, a community of interests existed between all the German heavy industries, both state and private. After 1945, the United Austrian Iron and Steel Works (die Vereinigten Oesterreichischen Eisen-und Stahlwerke) was created out of the substantial investments in the Linz state factory and the former Alpine company. Although war damage was relatively slight in Linz, the break down of Europe’s transportation systems caused initial start-up problems. The subsequent economic success of the mining industry in Austria, however, is mainly attributable to labor efficiency.
