CORPORATE LOBBYING AND REGULATORS REACTIONS

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CORPORATE LOBBYING AND REGULATOR’S REACTIONS

3.21 – IAS 39 dawns for local firms

3.22 - Tweedie the Unrelenting

                                                                                         

QUESTION 1 – 3.21

President Jacques Chirac lobby against the accounting standards reflect the private (economic) interest theory. In this theory groups are formed to protect the particular economic interest. In this case, a group of European banks and French government try to lobby the standard setters to form standards according to their economic interest.  Regulator is not neutral as IASB was lobbied by the European banks and French government and amend the standard which benefits these economic groups. In that case regulation serves the interest of politically effective groups.

Firstly, Jacques Chirac tries to maintain its position of power by opposing the amendment in Derivative accounting standard.  Some of the provisions of IAS 39 would show a significant volatility and that can damage the bank’s financial stability which in turns affects the economic stability. President Jacques Chirac might not be able to afford this loss as it affects its ability to re- elect as people will not vote him if economic condition of banks are not stable.

Secondly, ED proposed cash flow hedge accounting for their hedges and European banks opposed this proposal as they believe it creates an artificial volatility in their reported equity. So it means that adopting IAS 39 is harmful to the European banks and even to national economies. In order to save the national economy from these affects President of France was encouraged to lobby the accounting setters.

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Thirdly, financial market experts like banking regulators motivate Chirac to voice against the proposed amendments in IAS 39 (Virginia law and business review, 2008, vol 3, p.299) so may be Jacques Chirac was also lobbied by the banks because they will be significantly affected by these new provisions.

Fourthly, Jacques Chirac was motivated by Continental Europe as they proclaim independence from U.K and U.S in accounting matters as France has different culture of accounting (the equivalence approach to securities regulation, May 2006, p.43).

Lastly, Jacques Chirac believed that with the adoption of the proposed amendment in the IAS 39 ...

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