To read the full version of this content please select one of the options below:

Determinants of different accounting methods choice in Tanzania: A positive accounting theory approach

Nelson M. Waweru (School of Administrative Studies, York University, Toronto, Canada)
Ponsian Prot Ntui (Strathmore University, Nairobi, Kenya)
Musa Mangena (Bradford University School of Management, Bradford, UK)

Journal of Accounting in Emerging Economies

ISSN: 2042-1168

Article publication date: 5 July 2011

Abstract

Purpose

The purpose of this paper is to examine the factors that determine the choice of multiple accounting methods in Tanzania. The study investigates managers' decisions to choose accounting methods in a positive accounting theory perspective using panel data covering 60 years from 15 companies listed on the Dar es Salaam Stock Exchange.

Design/methodology/approach

Data were extracted from the companies' annual reports. Possible determinants of the choice of accounting methods are identified based on the positive accounting theory, including firm size, leverage, internal financing, proportion of non‐executive directors, ownership dilution, and labour force intensity. The study then utilises multiple regression analysis to determine the significant factors influencing the manager's choice of accounting methods.

Findings

The results show that the significant factors are company size, internal financing, proportion of non‐executive directors, and labour force. Contrary to the outcome of prior studies, the authors found that company size and internal financing are positively related with income strategy. The study proves statistically that there is a strong association between choice of accounting methods and income strategy.

Originality/value

The paper makes several contributions to the body of knowledge. First, in the Tanzanian context, it determines the factors which affect choice of accounting methods. Second, the study identifies the proportion of non‐executive directors as a new factor impinging on the choice of accounting policies. Finally, this study shows for the first time that the use of ratio of income‐increasing accounting policies to total number of accounting policies can be used as a dependent variable.

Keywords

Citation

Waweru, N.M., Prot Ntui, P. and Mangena, M. (2011), "Determinants of different accounting methods choice in Tanzania: A positive accounting theory approach", Journal of Accounting in Emerging Economies, Vol. 1 No. 2, pp. 144-159. https://doi.org/10.1108/20421161111138503

Publisher

:

Emerald Group Publishing Limited

Copyright © 2011, Emerald Group Publishing Limited