Determinants of accounting choices in Egypt

Abstract

In recent years, Egypt has been developing rapidly from a socialist to a fully developed market-based economy. One may expect that this economic transition towards a more capitalist orientation will influence the country's cultural and socio-economic environment, and consequently the behaviour of its corporate managers. The increasing separation of ownership and control of capital could be expected to increase agency problems associated with managerial decisions. In these circumstances, it should be interesting to identify whether 'positive accounting' hypotheses would apply in such an environment. Therefore, this paper examines the relevance to financial reporting in Egypt of some established positive accounting theory hypotheses in addition to a new hypothesis related to taxation. The evidence of the study is consistent with the validity of the conventional 'bonus' and 'debt' hypotheses and the new 'taxation' hypothesis. These conclusions are also consistent with recent empirical studies of cultural and socio-economic change in Egypt.

An exploration of managers' reasons for depreciation method choice in Egyptian companies

“…In this scenario, and in the context of accounting for depreciation, managers are assumed to choose straight-line depreciation in order to increase reported income. This topic and the development of the resulting hypotheses were extensively covered in Dey et al (2007). Hypotheses H1 e is the alternative empirical hypotheses for theoretical hypotheses H1 following this conventional thinking:…”

“…In this way, a range of depreciation methods is permitted by the tax regime. Dey et al (2007) discussed the cultural issues that may affect reporting choices in Egypt. These did not appear to produce behaviour that differs from that observed in more economically developed countries.…”

“…Following on from the empirical study undertaken by Dey et al (2007), the research discussed in this paper is based on data gathered from a sample of firms operating in Egypt.…”

“…The final published version can be found at: http:// dx.doi.org/10.1108/09675420910963379Managers' reasons for depreciation method choice: Exploring technical and PAT explanations in Egyptian companies Abstract Purpose: The paper seeks to complement a more conventional PAT-based study of accounting method choice in Egyptian firms (Dey et al, 2007) by examining three alternative computational reasons for depreciation method choice: simplicity; compatibility with industry norm; and suitability for class of asset.Design/methodology/approach: The paper draws on a questionnaire survey, sent to Egyptian companies, in which managers were asked to indicate their reasons for choosing depreciation methods as well as the actual depreciation methods used.Findings: The paper finds that technical reasons were frequently given in survey responses from managers. However, the available evidence on the actual depreciation methods used by their firms and industries is in fact more consistent with PAT-based theories of accounting choice than with such alternatives.…”

“…Managers' reasons for depreciation method choice: Exploring technical and PAT explanations in Egyptian companies Abstract Purpose: The paper seeks to complement a more conventional PAT-based study of accounting method choice in Egyptian firms (Dey et al, 2007) by examining three alternative computational reasons for depreciation method choice: simplicity; compatibility with industry norm; and suitability for class of asset.…”