Characteristics of Firms Making Accounting Changes.

Abstract This article empirically examines the motivations that management of a firm might pursue in making accounting changes. The 100 sample firms selected for the study were stratified according to whether or not they had received at least one consistency qualification during the ten-year period of 1959-68. Implicit in the use of size as the variable in the testing of the foregoing hypothesis is the assumption that larger firms have their financial performance subject to greater scrutiny in the financial press. Such an assumption seems realistic in view of the fact that larger firms generally have more stock outstanding and more stockholders, thus making news about those companies of interest to more persons. Data on industry classification were gathered so that it could be determined whether this characteristic had any effect on the number of consistency qualifications received. Firms receiving at least one consistency qualification were found to differ from firms that received no such qualifications with respect to both size and auditor.