Accounting Theory and Corporate Performance of a Business

The purpose of this report is to analyse the concept public interest theory, capture theory, economic interest theory, provide a basic definition of accountability and provide some aspects of corporate performance that a business is accountable for. Accountability can be defined as the obligation of a person or entity to account for their take the responsibility for its action take the responsibility for them and disclose the results in a transparent way.

RUNNING HEAD: ACCOUNTING THEORY 1
UNIVERSITY NAME
STUDENT NAME
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COURSE
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EXECUTIVE SUMMARY
The purpose of this report is to analyse the concept public interest theory, capture theory,
economic interest theory, provide a basic definition of accountability and provide some aspects
of corporate performance that a business is accountable for. for. Accountability can be defined as
the obligation of a person or entity to account for their take the responsibility for its action take
the responsibility for them and disclose the results in a transparent way.

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Table of Contents
INTRODUCTION.......................................................................................................................................4
PUBLIC INTERESTS THEORY PERSPECTIVE.....................................................................................4
CAPTURE THEORY PERSPECTIVE.......................................................................................................5
ECONOMIC INTERESTS THEORY PERSPECTIVE..............................................................................5
ACCOUNTABILITY..................................................................................................................................7
ASPECTS OF CORPORATE PERFORMANCE OF A BUSINESS..........................................................7
CONCLUSION...........................................................................................................................................8
REFERENCE..............................................................................................................................................9

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INTRODUCTION
The public interest theory scrutinizes the major terms the law that facilitates the protection and
benefits of the public widely. The capture theory describes the failure of the state which results
in the regulating body established to operate in the interest of the public and act on behalf of the
commercial and political groups and some other groups that control the industry.
PUBLIC INTERESTS THEORY PERSPECTIVE
Public interest theory can be defined as theory that scrutinizes in major terms the law that
facilitates the protection and benefits the public largely (Croley, 2009). It can also be defined as
the use of legal instruments for putting in place the socioeconomic policy objectives i.e. creation
social and economic rules that facilitates the realization of goals and objectives for instance
efficiency, stabilization and just income distribution. In recent economies the allocation of
limited resources is majorly determined by the demand. Under this theory, the allocation of
resources is desirable though these situations are not often adhered to. As by the theory,
government regulation is the efficient tool for defeating the limitations of imperfect competition,
unbalanced market operations, mission markets and the unfavourable market results. The
regulatory organ is viewed to represent the interest of the surrounding it operates but not
individual interests. The regulatory body should the legislation when they discover that it favours
the societal interest rather than the interest of the company. Though the public interest theory is
seemed to be relevant, its limitations includes; the legislature faces difficulties in ascertaining
whether the regulatory is working for the best interest of the public. The theory stresses the need
to maximize societal welfare and that the law should be due a cost scrutiny carried out to
ascertain whether the cost will upgrade market operations or it underestimate the social welfare.
The public interest theory is established under classical grounds of representative democracy and
the responsibility of the government whose duty is delegated to its civil servants. The companies
as by the theory are mandated to state the effects of their activities on the community and the
environment and highlight the strategies they have put in place to safeguard the society and the
environment at large from their devastating effects of their operations.
In order to ascertain whether or not the legislation should be introduced, the government may
carry out a survey prior to the introduction and place the outcomes of the study on the website.
The intense law should fully be made present online for the ordinary citizens to understand
(Mahoney, McGahan & Pitelis, 2009).

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CAPTURE THEORY PERSPECTIVE
The capture theory describes the failure of the state which constitute a regulatory body
established to operate in the interest of the public and act on behalf of the commercial and
political considerations of certain groups that control the industry govern by the regulation
(Etzioni, 2009). Should this occur, the political, firms, organization interest surpasses the
investor the society at large which greatly makes the society to lose a lot. The scenario results
because individuals with expanded stakes interest in the results of a regulation are anticipated to
devote their resources and energies in trying to reap the outcome of the regulation they consider,
whereas the public members with small individual stake are ignorant of this entirely.
The consumers and the tax payers who are normally faced with the challenge of little knowledge
on the market underlying issues and business are the beneficiaries of this disclosure. The
consumers benefit from this disclosure as the side effects of the commodities they consume are
disclosed and this makes them aware of the impact of the commodities on them. The consumers
will then make an informed decision on whether or not to consume the product with
consideration of their impact on the health and the surrounding environment. The disclosure will
benefit the consumers as the prices of the commodities are disclosed by the legislation
preventing the traders from hoarding the product and later raising their prices The consumers
who are the tax payers’ benefits from this as they will know whether their contributions to the
state are use in their best interest to finance these regulatory bodies (Li, Chen, Liu & Peng,
2014). The general public also benefits from this disclosure. The public are informed of the side
effects of the operations of the business on their environment and would take the necessary
actions to avoid failing victims of these societal impacts i.e. if the business is a pipeline industry,
the public will be cautioned not to consume water drawn from the sources where pipeline passes
as they may have contained spilled oil product. The government is also another beneficiary of
this legislation. The government would put in place measures that will aim at reducing the
environmental impact (Mahoney, McGahan & Pitelis, 2009)
ECONOMIC INTERESTS THEORY PERSPECTIVE.
The economic interest theory argues that rules are comprised of influence of supply and demand,
therefore it might boost the rules. The state is positioned on the supply side, and the interest
people on demand side. hence, the economic interest theory argues that the rules is the industry
based while objectives of rules and policies are to boost the needs of wider industry (Nelson,

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2009). Therefore, different interest groups will be at will to contest based on advantages and
through lobby to maximize on the benefits .it must be therefore seen and scrutinized whether
legislation will have advantage to companies.
The interest groups include the non-profit and mainly charitable organizations whose members
share a common cause for which they seek to influence the public policy without looking for
apolitical control (Suddaby & Muzio, 2015). Their chief role is to lobby the legislative bodies via
contribution to political parties, functioning to elect pliable politicians and carrying out a convert
campaigns. There are several types of interest groups they include; economic association i.e. the
chamber of commerce, and the trade unions and the religious bodies, Secondly professional
association, i.e. that of architects doctors and lawyers. Thirdly the public interest group i.e.
Friends of Environment who targets to benefit people beyond their membership and lastly the
special interest group established to focus on a very narrow area of interest. The major concern
and the requirement of this questions are the economic association which encompasses the
chamber of commerce and trade unions. The trade unions just like a political party has its
members being employees of certain company. The union advocates from for the rights and
privileges of its members. The union employed several methods i.e. strikes, demonstrations and
negotiations. The rights include better remuneration, better working environment, job promotion.
The government of a country sets legislation to protect the employees in the country. This
involves setting the minimum wage under which employees should be paid The trade unions
lobby the give to raise the minimum wage and the government responds by putting in place the
relevant legislation. The legislation facilitates the company accountability by requiring them to
show their financial statements to ascertain whether the minimum wage has been adhered to.
This requires the firms to have full accounting information of their statements as the regulatory
body will examine the adherence to this legislation of protecting employees from exploitation by
their employers
The other constituent of economic group is that of chamber of commerce i.e. The Chamber of
Commerce of the State of New York, in the United States of America The chamber of commerce
is a type of business network whose chief role is to expand the interest of the business. The
chamber of commerce is a spokesman and representative of the business

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ACCOUNTABILITY
Accountability can be defined in my view as the requirement of a person or an entity to account
for its activities, take the responsibility for them, disclose the results in a transparent way
(Messner, 2009). It can also refer to the process in which a person has a potential requirement to
validate their actions and to administer positive or negative consequences in respect to them. The
accountability theory validates how perceived importance to validate one’s behaviour to another
makes the person to be accountable for the whole processes in which decisions and judgements
are arrived at. In my understanding of accountability there e are two aspects the mechanism of
accounting and the virtue .It is the quality in which an individual portrays willingness to take
responsibility especially public organs and officials are faced with the requirement to validate
their actions to a certain part granted the right to issue a judgement on the action and subject the
individual to consequences of their actions .Accountability encompasses identifiability,
expectations of evaluation and monitoring of awareness. Identifiably means that the financial
statements should enable knowledgeable individuals to reach a consensus though not necessarily
general agreements on the interpretation of the financial matters. The expectations states that the
financial operations shall be subjected to analysis by a different party and that with due regard to
the legislation and laws be subjected to the implications of their actions.
ASPECTS OF CORPORATE PERFORMANCE OF A BUSINESS.
Corporate accountability is the execution of a publicly traded company in nonfinancial sectors
i.e. social responsibility, sustainability and environmental performance (Van der, 2009). It States
that financial accountability should not only aim at financial performance of the company but
also consider the society at large (Arendt & Brettel, 2010). The stakeholders i.e. employees and
the society at general in their accountability mechanisms. A firm is held accountable by
stakeholders i.e. the employees of the company if it needs to attain its goals ought to be
responsible to its employees. The company should grant them good working environment; this
involves a confer status to the top level employees and also the juniors should operate in an
environment fit for working. The company provide fringe benefits to its employees. The
processes of promotion should be just and with due regard to the technicalities and the
procedures put in place by the company. It should not be merited on the closeness to the boss as
a friend or for sexual relationship. All employees should be equally treated and in case of
punishments should be equally subjected to the same level. The employees should have

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remunerated fairly base on the quality of their work, qualifications and their experience levels
and the amount of work done to the entity. The firm through their corporate social responsibility
wing should be accountable to the society or the community at large in which they are
based .The firm should involve themselves in activities that are social mutual which include
development of infrastructure which involves; construction of roads and bridges, establishment
of schools, development of hospitals ,building of churches and hospitals and participating in fund
raising activities that aids the society .A firm can facilitate infrastructural developments by
offering capital ,provision of land and giving out its employees to aid in the construction.
CONCLUSION
In conclusion, business organization must adhere to some corporate governance issues so as to
be respected in the society and get support of the wider community.it must participate in the
projects of the community like harambees, building some projects in the community and
conserving the environment.it has been also shown from the above theories that balance between
various regulations and their benefits must be shown and ascertained very well.

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REFERENCE.
Arendt, S., & Brettel, M. (2010). Understanding the influence of corporate social responsibility
on corporate identity, image, and firm performance. Management Decision, 48(10),
1469-1492.
Croley, S. P. (2009). Regulation and public interests: The possibility of good regulatory
government. Princeton University Press.
Etzioni, A. (2009). The capture theory of regulations—revisited. Society, 46(4), 319-323.
Li, Y., Chen, H., Liu, Y., & Peng, M. W. (2014). Managerial ties, organizational learning, and
opportunity capture: A social capital perspective. Asia Pacific Journal of
Management, 31(1), 271-291.
Mahoney, J. T., McGahan, A. M., & Pitelis, C. N. (2009). Perspective—The interdependence of
private and public interests. Organization science, 20(6), 1034-1052.
Mahoney, J. T., McGahan, A. M., & Pitelis, C. N. (2009). Perspective—The interdependence of
private and public interests. Organization science, 20(6), 1034-1052.
Messner, M. (2009). The limits of accountability. Accounting, Organizations and Society, 34(8),
918-938.
Nelson, R. R. (2009). An evolutionary theory of economic change. harvard university press.
Suddaby, R., & Muzio, D. (2015). Theoretical perspectives on the professions. The Oxford
handbook of professional service firms, 25, 47.
Van der Laan, S. (2009). The role of theory in explaining motivation for corporate social
disclosures: Voluntary disclosures vs ‘solicited’disclosures. Australasian Accounting,
Business and Finance Journal, 3(4), 2.