Normative Accounting Case Study

Different types of theoretical perspectives have been used over the years to justify why business organizations involved in CSR activities and voluntarily disclose of CSR information (Patten 1991; Arman& Siti-Nabiha 2009; Bayound et sl.2012). These CSR theoretical perspectives can be categorized into positive accounting theory and normative accounting theory. Normative accounting is a theory to prescribe how an accounting particular practices should be undertaken (Deegan and Unerman 2011). Kristian (2013) argued that normative theories lacking empirical background because they are not based on observations. In contrast, positive accounting theory is based on logical deduction (empirical observations).Therefore, it concentrates on the relationships between individuals who provide resources to a company (stakeholders) and how accounting is used to these relationships (Deegan and Unerman, 2011).

Many theories are derived from a border social-political theory include Stakeholder theory, legitimacy theory and institutional theory (Brown & Fraser, 2006; Gary et al, 1996). These theories are more capable of provide insightful theoretical prospective on CSR practices than economics theories do such as agency theory (Gary et al, 1995).Moreover, Deegan (2009)

9), agency theory is an important part of Positive Accounting Theory. Agency theory concentrates on the relationship between agents (managers) and principals (stakeholders) (Healy and Palepu 2001). Jensen and Meckling (1976) argue that the agency problem occurs when there is dissimilar interests between managers and stakeholders or when stakeholders cannot monitor the management’s behavior. voluntary disclosure is another tool to mitigate the agency problem, were agency cost would be reduced when managers disclose more voluntary information (Barako et al., 2006) and also when external stakeholders are convinced that directors are acting in an optimal way (Watson et al.,