Accounting and the welfare state: The missing link

In recent years, nation states have internationalized and privatized accounting regulation by extensive use of International Financial Reporting Standards (IFRS). However, major differences between national accounting regulatory systems persist. In this paper we argue that a country's societal motives and values, best captured by the type of welfare state the country employs, shape the extent to which accounting regulations converge. Moreover, the welfare state approach explains the development and dynamics of accounting systems more completely than the conventional explanatory variables – legal and financial systems.The connection between the welfare state type and the way in which various corporate constituencies’ interests are balanced is first examined by constructing an ideal type of accounting regulation for each type of welfare state; then country case studies are examined to show how the welfare state explains differences in accounting regulation between countries.