Classifications manipulation and Nash accounting standards

Ronald A. Dye*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

76 Scopus citations


This paper studies a model of "classifications manipulation" in which accounting reports consist of one of two binary classifications, preparers of accounting reports prefer one classification over the other, an accounting standard designates the official requirements that have to be met to receive the preferred classification, and preparers may engage in "classifications manipulation" in order to receive their preferred accounting classification. The possibility of classifications manipulation creates a distinction between the official classification described in the statement of the accounting standard and the de facto classification, determined by the "shadow standard" actually adopted by preparers. The paper studies the selection and evolution of accounting standards in this context. Among other things, the paper evaluates "efficient" accounting standards, it determines when there will be "standards creep," it introduces and analyzes the notion of a Nash accounting standard, and it compares the standards set by sophisticated standard-setters to those set with less knowledge of firms' financial reporting environments.

Original languageEnglish (US)
Pages (from-to)1125-1162
Number of pages38
JournalJournal of Accounting Research
Issue number4
StatePublished - Sep 2002

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics


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