For helpful comments on earlier drafts, we thank, without implicating, Moses Abramovitz, Yves Balcer, John Bishop, Alan Blinder, Richard Burkhauser, Michael Darby, Irwin Garfinkel, Alan Gustman, Daniel Hamermesh, Martin Holmer, George Jakubson, Robert Lampman, Paul Menchik, Robert Moffitt, Michael Murray, Joseph Quinn, Timothy Smeeding, Eugene Smolensky, Barbara Wolfe and two anonymous referees.

APB, FASB, Power indices, Voting power

D. Paul Newman, [Discussion of The SEC's Influence on Accounting Standards: The Power of the Veto]: A Reply, Journal of Accounting Research, Vol. 19, Studies on Standardization of Accounting Practices: An Assessment of Alternative Institutional Arrangements (1981), pp. 170-173

Accounting standards, Standard setting process, SEC, Veto

To sum up, Emery and Cogger [5] have raised several interesting questions concerning the derivation of the safety index (as well as the related risk of ruin) and the interpretation of that index which needed to be addressed. While the potential limitations discussed are theoretically possible, closer examination reveals that most of the concerns raised are unlikely to occur in practical applications, although certain of the procedures utilized were in need of further explanation. Several of these issues also provide extensions of the present work to make the estimation of the risk of ruin an even more robust measure of the potential for corporate failure.

[Estimates of parameters in Tobit and other models for limited, truncated and censored dependent variables are not robust against misspecification. A test of the standard assumptions against a general misspecified alternative in the univariate censored normal model is derived and extended to the Tobit regression case. Computational ease and freedom from specification of a specific alternative hypothesis are primary attractions of the test.]

Reviews the book "Accounting Principles," by Roger H. Hermanson, James Don Edwards and R.F. Salmonson.

The objective of this study is to investigate the applicability of the size principle, which predicts a tendency to minimum winning coalitions, to political processes in accounting standard formulation. Actual winning coalitions in the APB and FASB are found to be significantly larger than minimum winning, leading to a consideration of the assumptions underlying the size principle. Two alternative hypotheses, the "information effect" and the "threat effect," are examined. Evidence regarding these hypotheses is inconclusive due to the inability to define unambiguously an observed winning coalition for the APB.