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This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License
Article
On FASB Standard Setting: The Role of Funding Structure and Voting Rule
Author(s)
Devon Baranek
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DOI:10.17265/1548-6583/2022.01.002
Affiliation(s)
Rider University, Lawrenceville, US
ABSTRACT
This study develops and tests hypotheses about organizational characteristics of the Financial Accounting Standards Board (FASB) and captures the effects of some recent changes on the operations of the Board in standard setting. I establish a methodology to quantify the complex work of the FASB through factor analysis and condense various proxies into three meaningful performance metrics: thoroughness, timeliness, and consensus. These performance measures are used as dependent variables in a regression analysis to capture how the work of the FASB varies with respect to funding and voting changes. I find evidence that a change in FASB funding from private donations to mandatory accounting support fees is associated with an improvement in Board consensus but no significant change in thoroughness or timeliness. I also find the change in voting rules from supermajority to simple majority is associated with improvements in timeliness but a decline in thoroughness and consensus. Overall, the results suggest that the work of the FASB is multidimensional and that the improvement of one area may come at the cost of another.
KEYWORDS
the Financial Accounting Standards Board (FASB), accounting regulation, standard-setting, FASB funding, FASB voting
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