Research directions in accounting history

RriM

Arrountiq

Review (1989) 21, 237-254

RESEARCH

DIRECTIONS IN ACCOUNTING HISTORY* CHRISTOPHER

J. NAPIER

The London School of Economics and Political Science

Accounting has sometimes been criticised as an illegitimate field for historical study. This paper examines three interrelated approaches to historical accounting research: the attempt to understand the past for its own sake, the locating of accounting in its sociohistorical context and the application of positive accounting theory to history. By identifying the potential for fruitful development in each of these three research directions, the paper concludes that there is a wide and growing role for historical accounting studies.

INTRODUCTION The American Accounting Association’s Committee History (1970) has defined accounting history as:

on Accounting

‘the study of the evolution in accounting thought, practices and institutions in response to changes in the environment and societal needs. It also considers the effect that this evolution has worked on the environment.’

This very popular view of accounting as an evolutionary social technology is echoed by leading scholars of accounting history. For example, Johnson (1984), arguing for the inclusion of accounting history in the curriculum of accounting students, claims that: ‘the study of accounting history actually increases an accountant’s ability to adapt to change. It does so by forcing him to contemplate the causes of change in accounting practice and to project the directions dictated by change.’

Parker (1981) points out that the study of accounting history is flourishing, particularly in Britain, with several younger scholars making important contributions. Although he generally supports the justifications of accounting history offered by the American Accounting Association, he is not wholly convinced by their metaphor of ‘evolution’. Parker illustrates the relevance of the American Accounting Association’s definition by Correspondence address: C. J. Napier, Department of Accounting and Finance, The London School of Economics and Political Science, Houghton Street, London WC2A 2AE. * Earlier versions of this paper were presented at seminars at Portsmouth Polytechnic in October 1987 and the University of Warwick in February 1988. The author wishes to acknowledge the comments of participants at these seminars, of his colleagues at the London School of Economics, and of an anonymous reviewer. 089%3939/89/030237 + 18 $03.00/O

‘(3 1989 Academic Press Limited

C.

J,

NAPIER

providing a summary of the main strands of historical accounting research in Britain, covering four main areas: the development of double-entry. corporate financial reporting, accounting institutions, and accounting history in relation to economic history and business history. Yet the case for accounting history is not universally accepted. Many academic accountants tend to disregard historical dimensions in their research. Attitudes in the accounting profession to history are at best ambivalent.’ The place of accounting history has been questioned more explicitly by Lister (1984). He has suggested that: ‘there is considerable evidence that tt is correct to regard accounting “history” as a series of disconnected episodes rather than as a coherent development. Furthermore, there are grounds for arguing that the development of accounting was irrelevant to, lagged behind, or even retarded social and economic progress. Finally, there is the fact that accounting practice in the past lacked (and still appears to lack) any conscious or unconscious scientific basis.’

To Lister, this establishes the ‘illegitimacy’ of accounting as a subject for historical study: ‘is not such material the food of antiquarians rather than of historians?’ He reaches this view because he regards history as being the analysis of ‘themes that had significant influence on the development of society’, and arrives at the conclusion that accounting did not have such an influence. So the study of accounting history is, to Lister, at best an interesting sideline and at worst a misallocation of scarce intellectual resources. Fortunately, we need not accept Lister’s conception of history as the last word.’ Indeed, we could regard each of his claims quoted above, not as objections to accounting history but rather as historical problems requiring study. Is accounting evolutionary (as seems to be the generally held view of accounting historians up to the 1970s and is implicit in the American Accounting Association’s (1970) definition) or is it discontinuous, and what are the implications of this for today? If accounting was irrelevant to social and economic progress, why did individuals and firms invest time and effort in compiling and utilising accounting records? Were the claims of early writers of treatises on accounting, as early as Pacioli in 1494, that a good bookkeeping system was a necessity for a business to prosper (Chatfield, 1977, p. 46), mere empty rhetoric? If, on the other hand, accounting retarded economic progress, how did it do so? Why, if indeed it is true, did accounting lack any conscious or unconscious scientific (presumably Lister means theoretical) basis? All these questions have indeed been asked under the aegis of accounting history, and answers, though tentative, are nonetheless illuminating, not only to the past, but also for accounting today. So what are the main thrusts of research into accounting history, and what ‘conceptual frameworks’ have motivated them? In this paper, three

RESEARCH

DIRECTIONS

IN

key approaches, which are interrelated tive, are examined:

ACCOUNTING

HISTORY

239

but are not intended to be exhaus-

1. understanding the past; 2. contextual&sing accounting; 3. the new positivism.

UNDERSTANDING

THE

PAST

This appears to be the main motivating force behind much of historical accounting research until quite recently. To use the terminology of the American Accounting Association’s Committee on Accounting History (1970), the justification for understanding the past is firstly intellect& and secondly utilitarian. The intellectual justification covers an interest in the past for its own sake, but more importantly ‘it illuminates the process by which accounting thought, practices and institutions develop, identifying the factors in the environment that induce change and revealing how this change actually occurs’. The utilitarian justification is the light that history is considered to throw ‘on the origins of concepts, practices and institutions in use today, yielding insight for the solution of modern accounting practices’. Much useful work in accounting history has been done, and continues to be done, under the primary motivation of understanding the past. This work may be found on several levels. First of all, to understand the past we must discover the past. We must study original accounting records, as well as secondary sources giving us information about how accounting was, or might have been, used. The discovery stage in the study of accounting history is essential for us to avoid the erection of theoretical superstructures on inadequate foundations, but it is perhaps the most demanding of time and labour. Yamey (1981, p. 128) has claimed that ‘for several long periods and several important places, we have not collected, arranged and analysed enough of the facts about accounting methods and practices to get us far in the writing of reliable history. . . . For England and Scotland for the period roughly 1500 to 1850, [less than twenty] sets of account books kept by double entry have been examined systematically by historians of accounting who have published their findings.’ The number of records studied might be more than Yamey suggests, and even a small number of records might be adequate if we can be sure that the practices they disclose are representative, but the danger of premature generalisation remains, and could potentially lead to deceptive conclusions, unless we eschew generalisation and focus on particular records in their own right. An example of the need for careful examination of actual accounts, and

240

C.

J.

NAPIER

the problems of basing conclusions on very thin evidence, arises in the development of group accounts in Britain during the 1930s. The ‘conventional wisdom’, put forward by writers such as Nobes & Parker (1985, p. 218), is that the latter part of the 1930s saw a rapid spread of group accounts, so that the requirement in 1939 of the London Stock Exchange for companies seeking new quotations to publish group accounts--a requirement that was not in practice brought into effect because of the outbreak of war-simply codified best practice. This conc!usion seems to have been based largely on secondary sources, augmented by one or two well-known examples of pre-war consolidated statements [for example, those of the Dunlop Rubber Company Limited from 1933, prepared under the direction of de Paula-see Kitchen & Parker (1980); p. 981. Recently, however, Bircher (1988), by examining a fairly large sample of company accounts held at the Guildhall Library in London, has found that the publication of group accounts in pre-war Britain was an isolated phenomenon, involving only a very few companies, and that there was no noticeable trend towards greater disclosure by groups during the 1930s. This puts the 1939 Stock Exchange requirement into quite a different light. So examination of original accounting documents is crucial in giving our theories and generalisations some empirical content. Original documents take various forms, and their chances of survival vary. Accounting records in the form of bound volumes are more likely to survive than more ephemeral loose-leaf statements.3 Hence, the more formal journals and ledgers tend to remain when memoranda, invoices and correspondence-the prime documents for transactions-and trial balances, balance listings and accounting statements-the end products of accounting -have been lost. Similarly, financial accounting records (in the widest sense) tend to survive where managerial records are destroyed. Survival of the accounting records of particular businesses and businessmen is a haphazard event and might itself induce biases. For example, much of our understanding of bookkeeping practice in 17th and 18th century England comes from a study of certain ledgers carried out by Yamey (1959). Many of these ledgers related to businessmen who would be better described as landed gentlemen with commercial interests than as merchants. Their ledgers survived among family documents (largely connected with the ownership of land) when those relating to the generality of merchants were less likely to have been preserved. We can only surmise whether the ledgers studied by Yamey were or were not representative of general practice. Surviving accounting records are, therefore, likely to reveal only a partial picture of the businesses to which they relate and of the times in which they originated. But, so long as we are aware of this, what can surviving records tell us? They can reveal much about the techniques of

RESEARCH

DIRECTIONS

IN

ACCOUNTING

HISTORY

241

bookkeeping, particularly if we are fortunate enough to have a full set of records. But it is difficult to draw direct conclusions from the records, avoiding any interpretation, except with respect to what are likely to be quite recondite details of technique. Even these details may, in themselves, be interesting in providing evidence of the diffusion of practical methods, and in elucidating the relationship between practical accounting records and accounting treatises. More significantly, accounting records may also reveal the subject matter of accounting, that is, what is accounted for. The degree of detail in certain accounts, and the care with which particular errors are dealt with, might allow us to hypothesise about what interested the preparers of the accounts. Conversely, the absence of certain accounts whose presence seems intuitively obvious to us might suggest different objectives for the accounting records that we are studying. Yet even at this fairly basic level, interpretation is creeping in. This is no bad thing; indeed, we might argue that it is interpretation that distinguishes history from antiquarianism. Our interpretations must have a degree of contingency about them: it might, for example, be plausible to interpret the arrangement of a particular set of books as implying that they are arranged in the manner observed because this corresponded to the organisation of the preparer’s counting house (see, for example, de Roover (1956) for this type of argument), but alternative explanations should not be ruled out. It is the sign of a good historian, however, that the explanations and interpretations that he or she offers have a degree of coherence-they tell a good story. Accounting records can also give us information as to accounting choices taken, for example, valuation methods adopted (consciously or implicitly). accruals ideas, profit recognition criteria, and so on. Here again we need to be careful. One of the dangers in attempting to understand the past is that of viewing it too much in terms of the present. Accounts of the past are too often judged using the criteria of today. In the belief that we know the current roles of accounting, we use these roles to test whether the accounts of the past meet them. Too often, we find that concepts and needs considered fundamental by modern accountants are not apparently addressed by the records that we are studying. Sometimes, indeed, we are tantalised by apparent early examples of modern techniques and concepts. and are tempted to identify early anticipations of these.’ But are we viewing our raw material through the blinkers of the present, and simply failing to see what is there because it does not fit within our preconceptions? It is perhaps not surprising that early writings on accounting history should reflect a degree of premature theorising, because much of the examination of early accounting records was driven by a desire to support or refute ideas linking the development of accounting with wider econ-

242

C.

J.

NAPIER

omit changes. A major factor here was the work of the German economic historian Sombart (1924), who claimed that: ‘It is hard to imagine capitalism without double entry bookkeeping: they belong together like form and content. And we may well question whether capitalism found in double entry bookkeeping a tool with which to apply its forces, or whether the spirit of double entry bookkeeping first gave birth to capitalism’,

and later: ‘Double entry bookkeeping came from the same spirit which produced the systems of Galileo and Newton, and the subject matter of modern physics and chemistry. By the same means, it organises perception into a system, and one can characterise it as the first cosmos constructed on the basis of mechanistic thought.’

The ‘Sombart Thesis’ motivated much of Yamey’s work (see particularly Yamey, 1949) as well as research by other writers into the origins of double entry. If double entry could be traced to a pre-capitalist society, or if double entry could be seen as having little connection with capitalist economics, the validity of the ‘Sombart Thesis’ would be questionable. It is perhaps unfortunate that much of the debate over the ‘Sombart Thesis’ reflects oversimplifications of Sombart’s arguments, and is couched within a crude ‘falsification’ methodology. With this in mind, the criticisms of Lister (1984), who sees the ‘failure’ of the ‘Sombart Thesis’ as being an important indicator of the illegitimacy of accounting as a proper subject for historical study, might be regarded as somewhat superficial. The examination of primary accounting records provides us with the raw data of history. We have other sources to help us understand the past. Treatises on accounting help to illuminate practice and allow us to judge practices of their period in terms of textbook methods and assumptions. A study of accounting treatises may be easier than examining original records. We have fairly complete lists of such treatises for certain periods of time and countries, although even here, as Yamey (1981, p. 129) points out, ‘the study of the treatises themselves has not been as thorough and complete as one would like it to be’. And problems of interpretation arise in this context too. Are treatises fair reflections of practice? How were treatises actually used (for example, as teaching manuals, works of reference, or something else)? Did treatises positively assist in spreading accounting practice, as writers such as Chatfield (1977, pp. 5241) claim, or did they simply reflect a more informal diffusion of practice through commercial contact?” Treatises often contain model sets of accounts, and these have been argued to reflect contemporary practice or even to have been drawn from actual businesses [see for example Edwards (1937) on early cost accounts], but how typical are such models? Given that treatises were frequently written as teaching manuals, how much can we read into the various explicit or implicit conceptual frameworks for accounting

RESEARCH

DIRECTIONS

IN

ACCOUNTING

HISTORY

243

offered by their authors (seeJackson (1956) for the various theories in 17th and 18th century Britain)? A third source of evidence concerning accounting ideas and practices comes from contemporary documents of a wide and diverse nature: government reports, Acts of Parliament, law cases, journalism, literary references and so on. There is always a danger of simple antiquarianism in how the material is used. To give a hypothetical example, an antiquarian might be satisfied with merely identifying every reference to accounts in the plays of Shakespeare, while an historian would attempt to integrate these references with a knowledge of contemporary accounting practice and theory in order to draw conclusions as to how well Shakespeare knew his accounting. Thorough analyses of legal accounting requirements, such as those by Edey & Panitpakdi (1956) and Edwards (1980), give us deeper insight into the framework within which accounting occurs, but even here we need to be careful not to exaggerate the significance of legal requirements, or their absence. For example, writers such as Edey & Panitpakdi tend to view the relative absence of accounting provisions in general British company law as pointing to a laissez faire approach by the State in the latter part of the 19th century. It is arguable, however, that greater weight should be given to the legislation requiring accounts for specific types of business (railways, banks, insurance companies, gas companies and others) in this period (Napier & Noke, 1988). This could be taken to indicate a much more interventionist attitude to accounting on the part of the State than seems to be implied by the relative absence of accounting requirements from general company legislation (which applied in practice only to the less significant economic entities, at least until the 1880s). Two problems with using contemporary documents are: how far should the researcher go into such sources; and how far can they be taken at face value? Research into journalistic references to accounting, for example, usually concentrate on a few publications outside the specialist professional press, such as The Times and Financial Times, but the attitude of these newspapers to accounting at any particular time must reflect only a partial (and, quite probably, a biased) view of overall social viewpoints. But where do we stop: with other national papers, major local papers, minor local papers, periodicals, trade journals? We can never be sure that we have not missed some significant reference in an obscure location. Moreover, how much can we rely on such indirect sources? Even authoritative sources such as law reports may reflect views or descriptions of accounting that have been filtered through the fallible understanding of lawyers. Journalists, novelists and playwrights cannot sensibly be expected to get things right: Shakespeare might have been a poor accountant. The historian must weigh up the sources and decide how deeply to probe such ‘tertiary’ literature.

244

C.

J.

NAPIER

To sum up, then, much historical accounting research has rightly been aimed at assembling primary and secondary historical evidence. Generalisations in the absence of adequate evidence are dangerous, as are attempts to understand the past in terms of the present. On the other hand, an approach grounded in antiquarianism is unlikely to prove fruitful in extending our understanding, whatever its intrinsic interest to those of an historical bent. It is an awareness of these problems that has led to a recent, very significant, trend in writing about accounting history: what in this paper is called ‘contextualising accounting’.

CONTEXTUALISING

ACCOUNTING

This approach to accounting history owes its name to the title of a paper by Hopwood (1983): ‘On trying to study accounting in the contexts in which it operates’. The main claim of researchers who adopt this approach to accounting history is that we must study accounting, not as a technique in itself, but as one element of the social and organisational context. Hopwood (1987, p. 207) has himself recently criticised much traditional research in accounting history, within the tradition endorsed by the American Accounting Association (1970), Parker (1981) and others, as having: ‘adopted a rather technical perspective delineating the residues of the accounting past rather than more actively probing into the underlying processes and forces at work. Until recently,. most historical analyses ofthe accounting phenomenon, if not adopting a quite atheoretical stance, have been content to see accounting change as a process of technical elaboration and, almost inevitably, improvement.’

While this view is, to some extent, contradicted by a tendency on the part of some accounting historians to premature theorising, particularly in the context of the ‘Sombart Thesis’, Hopwood’s criticism of past writing on accounting history hits the target more often than not. To Hopwood, the main idea underlying most earlier historical research, sometimes explicitly but more often implicitly, is one of accounting as a progression to what it now is (sometimes regarded as what accounting should be, a view described by the American Accounting Association (1977) as ‘accounting Darwinism’). Accounting was seen by earlier researchers (the classic example is Littleton, 1933) as evolving through time. But those who would contextualise accounting see history as more discontinuous. The seeds of present practices and explanations cannot necessarily be detected in the past: accounting becomes what it was not. Most attempts to understand the past of accounting do not adopt an explicit view of history and how it should be written. It is in this sense

RESEARCH

DIRECTIONS

IN

ACCOUNTING

HISTORY

245

above others that Hopwood describes accounting history as ‘atheoretical’. Lister (1984) judged accounting history in terms of a tradition represented by such writers as Carr (1962), Collingwood (1946), Postan (1971) and Rowse (1963). This tradition sees history in general very much in the intellectual and utilitarian terms used by the American Accounting Association (1970). To Carr, for example, the purpose of history is to enable mankind to understand the society of the past and to increase mastery over the society of the present (1962, p. 49). The main influence on the contextualisers, however, is the French writer Michel Foucault (1970; 1972; 1977; 1980). This influence works on several levels. It provides a notion of a ‘discourse of accounting’: a language expressed in terms of accounting that, as it changes through time, enables us to see, within accounting, different phenomena, and by seeing them to control them. The discourse of accounting is very much involved with relations of power induced by the types of knowledge legitimised by the discourse. Foucault’s main contribution here is seen as being the identification of a broad shift in the nature of power occurring around 1800, from what he calls sovereign power to disciplinary power. Sovereign power is seen as arbitrary but at the same time limited. It ultimately relies on physical control of things and persons. Disciplinary power, on the other hand, penetrates into all aspects of life through regulations and techniques of administration, achieving the ‘calculated management of social life’ (Miller & O’Leary, 1987, p. 238). Power-knowledge relationships have been analysed in the context of accounting history by writers such as Hoskin & Macve (1986; 1988). Loft (1986; 1988), Miller & O’Leary (1977) and Hopwood (1987) himself. A good illustration of the insights attributed to a Foucauldian perspective is Hopwood’s reinterpretation of the research of McKendrick into the 18th century potter Josiah Wedgwood. McKendrick (1970) has described how Wedgwood reacted to adverse market conditions in 1772 by reviewing carefully his prices and costs, so as to identify the product lines where scope for price cutting existed. Almost as an accidental byproduct of this review, Wedgwood was able to identify fraud by his London agent and impropriety and inefficiency on the part of his employees. To Hopwood (1987, pp. 214-218), the unanticipated nature of the consequences of Wedgwood’s accounting is central to the notion of accounting’s becoming what it was not. One aspect of this is ‘putting accounting where accounting was not’. The stumbling block to Wedgwood’s review was that techniques of accurate cost finding did not exist in 1772, even though ‘a concept of cost entered into the discourse ofcommerce and trade, and could thereby mobilise action. . Cost remained an idea, not a fact.’ As Wedgwood tries to construct his measures of cost, possibilities for organisational change and reform emerge that were

246

C.

J. NAPIER

effectively invisible in the absence of cost measurement. As Hopwood

puts

‘once [costs had been] constructed, however, Wedgwood had a powerful instrument for observing the organisation in economic terms. His strategic conception of the role which records could play in the management of crisis had resulted in a means by which he could penetrate the inner workings ofthe organisation. A new visibility had been created. The organisation had been coionised by economic facts. An accounting eye had provided Wedgwood with a new means for intervening in the organisation. And intervene he did.’ (p. 217)

The new costing data allowed Wedgwood to control and to change his production processes in ways hitherto unforeseen. Moreover (although this is a point that Hopwood does not emphasise), it started to enable Wedgwood to control his organisation at a distance, ‘by founding the traditions of a foreman class and equipping it with rules and regulation’ (McKendrick, 1961, p. 46). Accounting, introduced where it had not been, became an instrument of transformation, and the knowledge granted by accounting gave Wedgwood new dimensions of power and control. The contribution of Foucault to the contextualisation of accounting arises in two other fundamental ways. The first of these is the notion of genealogy. This creates a role for history in making intelligible what we think today, by elucidating the conditions for its formation. We do this, not by looking for a single point in history as the origin of our current practices and concepts, but rather by identifying the complex of dispersed events that gave rise to our contemporary condition. Of course, genealogy looks at the invention and development of accounting techniques, but in the context of other types of event, such as particular national conditions, political objectives of states, the development of related disciplines and historical chance. So genealogy involves an opening out of our history from the purely accounting to include the social context. Foucault’s other significant input is the notion of archaeology.” This relates to the way in which we should go about doing history. Our attention should be directed towards the emergence of forms of discourse, and their grounding in institutional and legal criteria and pedagogical norms. An archaeology, in the Foucauldian sense, is an attempt to isolate the conditions that make practices and discourses possible, aiming to reconstruct the basis on which practice is formed, functions and has its effects. Genealogy, however, focuses on the discontinuities and transitions whereby practices take on new signiflcances as they become involved in new purposes.’ Whether or not the Foucauldian programme will ultimately be successful in expanding our understanding of accounting history remains to be seen. However, this approach does seem to promise a framework for areas such as management accounting, where significant contributors such

RESEARCH

DIRECTIONS

IN

ACCOUNTING

HISTORY

247

as Kaplan (1984) are advocating a greater reliance on field-based, casestudy research in order to reconstruct not only management accounting’s history, but also, in a sense, the actual discourse of managerial accounting.x A good example of historical work of this type is a paper by Miller & O’Leary (1987) examining how costing techniques, developed in the early 20th century, aided management contro1 of employees as individuals. The paper provides both an archaeology of concepts such as efficiency and standards and an examination of the power-knowledge relationships engendered within such concepts. A contextualising of accounting is also relevant to studies of the development of accounting as a profession. Many studies in this area have been anecdotal and relatively unstructured (for example Parker (1978) on early British accountants), and have tended to be uncritical (for example, Jones (1981) on the evolution of a major firm of accountants). Such studies are nonetheIess valuable in providing us with data for deeper theorising. Recently, we can identify a more explicitly sociological (although not necessarily Foucauldian) dimension to the study of the accounting profession, seen, for example, in papers by Macdonald (1984), Loft (1986) and Willmott (1986). Many of the papers aimed at contextualising accounting require considerable effort on the part of their readers. The underlying scholarship is not worn lightly. Concepts and disciplines quite distant from accounting are called into play, in particular sociology and philosophy. Accounting historians often have comparative advantages over their colleagues in other branches of accounting in terms of these discourses, but some accounting academics find such an approach to be obscure if not obscurantist. Some such academics are happier with a ‘positive’ approach to accounting. Recently, historical research in a ‘positive’ framework has started to emerge, and such research might well offer insights of its own into accounting history.

THE

NEW

POSITIVISM

The ‘positive’ approach to accounting has become influential during the last ten years. Positive accounting theory views the objective of theory as explaining and predicting accounting practice. The strength of positive theory is seen as lying in its testability against empirical data, and positive accounting theory is characterised by the (often sophisticated) statistical testing of hypotheses derived from mainly economic models of accounting. A positive, econometric approach has had an exciting and dynamic impact on economic history, represented by the ‘cliometric’ school of historians [a recent review by one of the leading practitioners is McCloskey

248

C.

J.

NAPIER

(1987)l. In that field, interesting and radical results have been obtained. and the understandings of economic historians have changed as a result. The positive approach to accounting theory is often closely associated with Watts & Zimmerman of the University of Rochester, USA. The ‘Rochester School’ appears ambivalent towards historical research in general, but certain types of historical research fit well within a positive framework. One problem with positive accounting theory is that some of its predictions are ‘distorted’ by the existence of accounting regulation. Positive historical research might attempt to test such predictions on ‘undistorted’ pre-regulation data. For example, Chow (1982) examined firms’ incentives to pay for auditing. It seems plausible to argue that the existence of a mandatory audit requirement would distort standard demand-and-supply economic models of auditing (see Benston, 1979-80). Chow avoided this problem by choosing a period unaffected by mandatory audit requirements, looking at quoted companies in the USA in 1926. He used an agency theory framework to generate his hypotheses, and found some support for his hypothesis that the demand for external auditing would be positively associated with firm size, gearing and the existence of accounting-based debt covenants, all key variables in agency models. Another paper by Chow (1983) illustrates a fertile area for positive historical research. This is the impact of regulation and changes in regulation. In such research, hypotheses are developed as to how changes in regulation will affect the wealth of interested parties (shareholders, bondholders, management, etc.) and these hypotheses are tested. Chow asked whether the US Securities Acts of 1933 and 1934, which significantly and unexpectedly increased firms required financial disclosure while curtailing their accounting alternatives, would have affected shareholder and bondholder wealth, and derived hypotheses as to the direction of change in wealth of the various parties. He found some empirical support for his hypotheses, although his methods and results have been criticised by Merino et al. (1987). Other positive historical work relating to the impact of regulation has been carried out in the USA by Uenston (1973) and Deakin (1976), and in Australia by Whittred (1987). It is notewothy that little comparable work has yet been done in Britain.’ The positive approach has gained some notoriety through Watts & Zimmerman’s paper: ‘The demand for and supply of accounting theories: The market for excuses’ (1979). This paper claims to establish how accounting theories arise. Three main demands for theories are posited. First, there is a pedagogic demand, to assist in the teaching of accounting: ‘accounting teachers develop pedagogic devices (rules-of-thumb) to assist learning and to structure the variation found in practice’. Second, we have an information demand, for insight into how choices of accounting practices

RESEARCH

DIRECTIONS

IN

ACCOUNTING

HISTORY

249

affect management behaviour and agency costs. Finally, and most controversially, there is ajust$ication demand: a demand for excuses or rationalisations of self-interested accounting choices, cast in the form of theoretical accounting ideas. Watts & Zimmerman give some historical case studies to support their argument, but this appeal to history appears to be made more for rhetorical reasons than on evidentiary grounds. Both their thesis and their use of evidence have been widely criticised [most recently by Whitley (19SS)], but we should still note the positive approach, shorn of any excesses, as a possible framework for viewing accounting developments. A positive approach has its advantages: research is likely to be well grounded in theory (albeit one that mainly reflects economics, and that only from a partial, neo-classical, perspective), and the problems addressed are likely to be of contemporary relevance (although this might reflect the demand for positive explanations of certain current phenomena rather than anything intrinsic to positive accounting theory). Yet there are obvious dangers. Firstly, there is the problem of data: positive researchers are likely to take accounting numbers and other statistics, such as security prices, as unproblematic givens, while other historians might regard much of the raw data as inherently suspect. Indeed, some positive theorists would make a virtue of taking historical data at its face value, since they see their role as interpreting the numbers that actually appeared rather than trying to ‘second-guess’ them. Positive theorists are more likely to be worried about the difficulty with which access to the data may be achieved: it is likely that the volume of positive historical research will be strongly related to the emergence of historical databases of, for example, security prices.“’ Secondly, there is the danger that the questions asked by positive historians may be inappropriate to an understanding of the past as it was. For example, the assumptions underlying the work of Chow and similar writers have been rejected as ‘ahistorical and asocial’ by Merino & Neimark (1982), who identify the US Securities Acts of 1933 and 1934 not as impositions distorting the market mechanism for disclosure, but rather as ‘part of an ongoing attempt to maintain an ideological, social and economic status quo’ (p. 33). Positive accounting history tends to run into the trap of trying to understand the past in terms of the present. We have met this problem before, but positive historians are particularly prone to see in the past only what they can model using the theories and analytical tools of today.” This trap is avoidable, as the ‘cliometric’ approach to economic history seems in general to have managed (McCloskey, 1987). CONCLUSION Three main strands of historical accounting research have been examined. First, the traditional type of research, motivated, at best, by a desire to

250

C:. J.

NAPIER

understand the past, was examined. This approach has generated much data regarding the form of accounts and accounting practice in various periods. More data, however, is always useful, and particular areas where research would be desirable are the actual practice of company accounting in the 19th and early 20th century (we know something-but certainly not enough-about their published financial statements, but much less about how those statements were compiled from the basic accounting data), the use of accounting for managerial purposes, and the relationship between accounting (both as a practice and as a profession) and the State. The paper then examined two recent developments in historical methodology which are quite different in their approach. These are the sociohistorical approach to studying accounting in the contexts in which it operates, and positive historical research. Whether a positive approach will have an impact on accounting history similar to that of ‘cliometrics’ on economic history remains to be seen, but one might wonder whether those who have developed the necessary analytic and econometric skills will consider more tractable (in terms of the availability of data), and apparently more relevant problems to have a greater degree of attractiveness than historical issues. The danger of positive historical research lies in its tendency to address today’s issues, using historical data as much for its rhetorical as its evidentiary value, rather than doing historical research on its own terms. The ultimate success or otherwise of the more sociologically oriented approach also remains to be seen. The approach does provide a theoretical structure within which accounting history may be written, but it is not clear whether this structure will prove liberating or ultimately constricting. The actual content of the historical contextualisers’ research programme could well be quite similar to that of the traditional school, as many issues are seen as problematic by both approaches. The contextualisers are likely, however, to wish to rely on the traditionalists to generate much of the raw data for their theorising. One significant problem that the new approach in particular raises is the explication of how a discourse of accounting developed around 1800 to 1850. Before then, although accounting was written and talked about to a certain extent, it seems to have been comparatively little implicated in a wider social and economic context. The 19th century, however, sees the emergence of accounting as a distinct discipline (the Foucauldian overtones of this word are intentional) and this has deep and, so far, little-explored implications, not only for the growth of accounting theory and practice but also for the creation of a profession devoted to preparing and reviewing accounts. Such a project is likely to involve the work of many contributors, looking at particular areas of accounting in order to create the foundations on which a general study of accounting may be erected.

RESEARCH

DIRECTIONS

IN

ACCOUNTING

HISTORY

251

So we may conclude that there is a wide and growing role for historical accounting studies. An important part of the accounting craft is, in a sense, the writing of history-recording the ongoing economic history of organisations and individuals. It seems appropriate that a historical perspective should be applied to, and should prove fruitful to, the study of accounting itself.

NOTES

1. Such attitudes are well summed up by some remarks of a former Chairman of the Accounting Standards Committee at a meeting at which the author was present. The subject of the meeting was foreign currency translation, and the speaker started by apologising for ‘boring the audience with a lot of history’. His talk continued with a description of events that took place less than ten years ago! On the one hand, he seemed totally unaware that problems of foreign currency translation are almost as old as accounting itself [for example, de Ste. Croix (1956; p. 24) describes a foreign currency problem arising in the Parthenon building accounts of 5th century BC Athens], while on the other he feared that even quite recent events would appear of little relevance to his listeners. 2. Lister’s paper has been criticised at length by Hopwood &Johnson (1986). 3. Although it is often surprising what exactly does survive, and in what form, so any generalisations in this area cannot be absolute. 4. For example, Most (1974) interprets some very obscure passages of Cicero to argue that the Romans had developed double entry bookkeeping, a view that was strongly rejected by the major contributor to our understanding of accounting in the classical world, de Ste. Croix (1956), and more recently by Macve (1985); and de Roovcr (1956, p. 144) has interpreted a provision for unpaid taxes in a set of accounts from 1399 as an early example of accrual accounting. 5. It is quite likely that treatises both reflected and helped to advance the diffusion of accounting practices. 6. Archaeology in the Foucauldian sense must not be confused with antiquarianism, which is necessarily oriented towards the particular and specific. 7. It should be noted that, while some accounting historians have tended to apply the methods of genealogy and archaeology indifferently, Foucault himself tended to reject archaeology towards the end of his life (Dreyfus 81 Rabinow, 1982, p. 100). X. Management accounting itself provides a good illustration of the rhetorical use of historical argument to support contemporary debate, in the form of the recent book Relevance Lost (Johnson & Kaplan, 1987). Y. A recent empirical study by Morris (1986) of late 19th century depreciation accounting in Britain and Australia, while using various straightforward statistical tests, does not employ the ‘heavyweight’ econometric methods associated with the positive accounting school. 10. Indeed, Watts & Zimmerman (1986, p. 346) associate the supply of positive accounting research in general with reductions in the cost of data finding and processing. 11. This sometimes results in ill thought-out statements such as that of Watts & Zimmerman (1979, p. 290): ‘Given that the function of dividend covenants is to reduce the agency cost of debt, it is not surprising to observe them existing as early as 1620 for

252

C.

J.

NAPIER

UK companies, long before limited liability was generally rccogniscd for cotnpan~c\’ Thus statement is bold in its use of anachronistic terms (the ‘dividend covenant to which Watts and Zimmerman refer, which appears in the Charter of the New RiverCompany granted by James I in 1620, is nothing to do with debt, but is simply a prohibition on the payment of dividends out of capital), and \hows a remarkable ignorance of the development of the corporation m the early 17th century (the examples cited by Watts & Zimmerman’s source for their statement-Kehl (1941. p. l)~-are all charter-cd or statutory corporatmns ulitlr limited liability).

REFERENCES History. American Accounting Association (AAA) (1970). C ommittee on Accounting The Accounting Review, Vol. 45 (Suppl.). American Accounting Association (AAA) (1977). C ommittee on Concepts and Standards for External Financial Reports, Statement on Accounting Theory and Theory A~eptance, AAA: New York. Benston, G. J. (1973). ‘Required disclosure and the stock market: an evaluation of the Securities Exchange Act of 1934’, Ameriran Economic Review, March, pp. 132-155. Benston, G. J. (1979-80). ‘The market for public accounting services: Demand, supply and regulation’, Acrotrntin~jr~otrmaI, Winter, pp. 246. Bircher, C. P. (1988). ‘The adoption of consolidated accounting in Great Britain’, Accounring and Business Research, Winter, pp. 3-13. Carr, E. H. (1962). What is History?, London: Macmillan. Chatfield, M. (1977). A History of Accounting Thought, Huntington, NY: Kricger. Chow, C. W. (1982). ‘The demand for external auditing: Size, debt and ownership influences’, The Accounting Review, April, pp. 272-291. Chow, C. W. (1983). ‘The impact ofaccounting regulation on bondholder and shareholder wealth: The case of the Securities Acts’, The Accounting Review, July, pp. 485-520. Collingwood, R. G. (1946). The Idea ofHistory, Oxford: Clarendon Press. dc Roover, R. (1956). ‘The development of accounting prior to Luca Pacioli according to the account-books of medieval merchants’. In A. C. Littleton & B. S. Yamey (Eds) Studies in the History of Accounting, pp. 114-l 74. London: Sweet & Maxwell. de Ste. Croix, G. E. M. (1956). ‘Greek and Roman Accounting’. In A. C. Littleton & B. S. Yamcy (Eds), Studies in the History of Accounuq, pp. 14-74, London: Sweet & Maxwell. Deakin, E. B. (1976). ‘Accounting reports, policy interventions and the behavior ofsecurity prices’, The Accounting Review, July, pp. 590603. Dreyfus, H. L. & Rabinow, P. (1982). Michel Foucault: Beyond Strurturalism and Hermeneutics, Brighton: Harvester Press. Edcy, H. C. & Panitpakdi, P. (1956). ‘British Company Accounting and the Law 1844 1900’. In A. C. Littleton & B. S. Yamey (Eds), Studies in the History qf Accounting. pp. 356379. London: Sweet 81 Maxwell. Edwards, J. R. (1980). British Company Legislation and Company Acrounrs 18441976, New York: Arno Press. Edwards, R. S. (1937). ‘Some notes on the early literature and development of- cost accounting-II’, The Accountant, 14, August, pp. 225-231. Foucault, M. (1970). The Order of Things, London: Tavistock Publications. Foucault, M. (1972). The Archaeology ofKnowledge, London: Tavistock Publications. Foucault. M. (1977). Discipline and Punish, London: Allen Lane.

RESEARCH

DIRECTIONS

IN

ACCOUNTING

HISTORY

253

L-oucault, M. (1980). Power/Knowledge, Brighton: Harvester Press. Hopwood, A. G. (1983). ‘On trying to study accounting in the contexts in which it operates’, Accounting, Organizations and Society, pp. 287-305. Hopwood, A. G. (1987). ‘The archaeology of accounting systems’, Accounting, Organizations and Society, pp. 207-234. Hopwood, A. G. & Johnson, H. T. (1986). ‘Accounting history’s claim to legitimacy’, The lnternationaljournal of Accounting, Spring, pp. 37-46. Hoskin, K. M. trc Macve, R. H. (1986). ‘Accounting and the examination: A genealogy of disciplinary power’, Accounting, Organizations and Society, pp. 105-136. Hoskin, K. M. & Macve, R. H. (1988). ‘The genesis of accountability: The West Pomt connection’, Accounting, Organizations and Society, pp. 37-73. Jackson, J. G. C. (1956). ‘The history and methods of exposition of double-entry bookkeeping in England’. In A. C. Littleton and B. S. Yamey, Studies in the History of Accounting, pp. 288312. London: Sweet & Maxwell. Johnson, H. T. (1984). ‘The role of accounting history in the education of prospectrve accountants’. Arthur Young Lecture No. 6, University of Glasgow. Johnson, H. T. & Kaplan, R. S. (1987). Relevance Lost: The Rise and Fall qf Manqrmenr Accountirq, Boston, MA: Harvard Business School Press. Jones, E. (1981). Accountancy and the British Economy 184&1980: The Evolution of Ermt G Whinney, London: Batsford. Kaplan, R. S. (1984). ‘The evolution of management accounting’, The Actountin,q Review. July, pp. 39&418. Kchl, D. (1941). Corporate Dividends, New York: Ronald Press. Kitchen, J. & parker, R. H. (1980). Accounting Thought and Education: Six British Pioneers, London: ICAEW. Lister, R. J. (1984). ‘Accounting as History’, 7’he Znfernational~ourrzal qf Accounting, Spring, pp. 49968. Littleton, A. C. (1933). Accounting Euoluriorr to 1YfXI. New York: American Institute Publishing Company. Loft, A. (1986). ‘Towards a critical understanding of accounting: The case of cost accounting in the UK, 1914-1925’, Accounting, Organizarionr and Society, pp. 137-171. Loft, A. (1988). Understanding Accounting in its Social and Historical Context: The Case oj’ Cost Accounting itz Britain 1914-1923, New York: Garland Publishing. Macdonald. K. M. (1984). ‘Professional formation: The case of Scottish accountants’, BririshJourrtal of Sociology, June, pp. 174-189. Macvc. R. H. (1985). ‘Some glosses on “Greek and Roman accounting” ‘, History of Politic
254

C.

J.

NAPIER

Most, K. S. (lY74). ‘The accounts of Ancient Rome’. Academy of Accountmg Historians Working Paper No. 3. Napier, C. J. & Noke, C. W. (1988). ‘Accounting and law: An htstorical overview of dn uneasy relationship’. Paper presented at the Deloitte Haskins 81 Sells/ICAEW Accounting Research Symposium, 26 Scptcmbcr. Nobcs, C. W. & Parker, R. H. (1985). Comparative Znternafional Arrounting (2nd edn.), Deddington, Oxon: Philip Allan. Parker, R. H. (1978). ‘British men ofaccount’, Abacus, June, pp. 5345. Parker, R. H. (1981). ‘The study of accounting history’. In M. Bromwich s( A. G. Hopwood (Eds), Essays in British Accounting Research, pp. 279-293, London: Pitman. Postan, M. M. (1971). ‘The historical method in social science’. In Fact and Relevance, Cambridge: Cambridge University Press. Rowsc, A. L. (1963). The Use ofHistory (2nd edn.), London: English Universities Press. Sombart, W. (1924). Der Moderne Kupitalismus (6th edn), Leipzig: Durcher & Humboldt. Translated by K. S. Most (1979), ‘Sombart on Accounting History’, Academy of Accounting Historians Working Paper No. 35. Watts, R. L. & Zimmerman, J. (1979). ‘The demand for and supply of accounting theories: The market for excuses’, The Accountiq Review, April, pp. 2733305. Watts, R. L. & Zimmerman, J. (1986). Poritiue Arrountiq Theory, Englewood Cliffs, NJ: Prentice-Hall. Whittred, G. (1987). ‘The derived demand for consolidated financial reporting’,Jourtral qf Accow~ting and Economics, December, pp. 25&285. Whitlcy, R. D. (1988). ‘The possibility and utility of positive accounting theory’. Accotrnting, Organizations and Society, pp. 631645. Willmott, H. (1986). ‘Organising the profession: A theoretical and historical examination of the development of the major accountancy bodies in the UK’, Accounting, Organizations and Society, pp. 555-580. Yamey, B. S. (1949). ‘Scientific bookkeeping and the rise of capitalism’, The Economic History Review, pp. 99-l 13. Yamey, B. S. (1959). ‘Some seventeenth and eighteenth century double-entry ledgers’, The Accounting Review, October, pp. 534-546. Yamey, B. S. (1981). ‘Some reflections of the writing of a general history of accounting’, Arrounting and Business Research, Spring, pp. 127-135. Ihtes:

Received

16 February

1938; in revised form 30 November

1988.