Bruce G. Carruthers

Accounting, ambiguity, and the new institutionalism

Abstract The New Institutionalism is a recent development in organization theory with great relevance to accounting research. New institutionalists view accounting practices as one of a larger set of features that can legitimize organizations through construction of an appearance of rationality and efficiency. Ceremonial adherence to legitimate norms may have little material impact because formal organizational structure is decoupled from actual organizational processes. Whether substantial decoupling undermines organizational legitimacy, who the key audiences for organizational appearances are, and the relation between technical and institutional factors, are key issues that remain unsettled in new institutionalist research.

The recursivity of law: Global norm making and national lawmaking in the globalization of corporate insolvency regimes

For the past 15 years an enormous enterprise of global norm making and related national lawmaking has been underway in many areas of global commerce. This article shows that leading global institutions, such as the World Bank, IMF, and United Nations, are building an international financial architecture with law—including corporate bankruptcy law—as its foundation. Building on research on international institutions and three national cases (China, Indonesia, Korea), the authors propose a new framework for legal change in a global context—the recursivity of law. They argue that the globalization of bankruptcy law has proceeded through three cycles: (1) at the national level through recursive cycles of lawmaking, (2) at the global level through iterative cycles of norm making, and (3) at the nexus of the two. Recursive cycles are driven by driven by four mechanisms—the indeterminacy of law, contradictions, diagnostic struggles, and actor mismatch. Thus the recursivity of law both revives and expands the sociological theory of legal change and offers a basis for an integrated theory of globalization and law.

Money, Meaning, and Morality

Modern money creates, transforms, transports, and possesses meaning by virtue of how it is used. This article devises a framework for the systematic study of monetary meaning. In particular, monetary meanings depend on the flow of money (both its proximate source and future direction) and on who promulgates or issues it. Meanings also derive from how moneys use and flow are restricted and on monetary media. Monetarization quantifies social activities and introduces new equivalences and comparisons. The factors shaping meaning also underpin important types of monetary variation (homogeneous vs. differentiated money; anonymous vs. personal; material vs. immaterial).

The Formative Years of U.S. Social Policy: Theories of the Welfare State and Social Policies in the American States During the Great Depression

This paper reports the results of a cross-sectional analysis of emergency relief, unemployment insurance, and old-age pensions in the 48 American states. It analyzes six outcomes: state emergency-relief expenditures andfederal emergencyrelief expenditures from 1933 to 1935; the timing of passage of unemploymentcompensation legislation; the timing of passage of old-age pension legislation; and the contents of old-age pension and unemployment-compensation legislation. These outcomes represent different dimensions of social policy and are used to appraise three theoretical approaches: economic, democratic politics, and statist explanations. In the analysis, the sample is split into industrialized and nonindustrialized states, in accordance with recent cross-national research on social policy and social spending. Although the results yield some support for all three perspectives, the statist perspective is especially well supported. The findings suggest that the different perspectives are limited in applicability to specific outcomes or samples, or both. The superior performance of the statist perspective is due to its applicability across outcomes and subsamples.

Knowledge and liquidity: Institutional and cognitive foundations of the subprime crisis

This chapter examines the central role played by credit rating agencies in the production of “knowledge” about financial instruments. That “knowledge,” in the form of credit ratings, underpinned disintermediation in mortgage markets by giving investors confidence that they knew the risk-and-return properties of otherwise opaque collateralized debt obligations (CDOs) and mortgage-backed securities. Credit ratings helped to “standardize” structured financial products and create liquid markets. However, this cognitive machinery failed and liquidity collapsed during the current crisis. I use this failure to examine the role of institutionalized cognition in the production of market liquidity.

Bringing 'Honest Capital' to Poor Borrowers: The Passage of the Uniform Small Loan Law, 1907-1930

The Uniform Small Loan Law (usll)—the primary tool of the Russell Sage Foundation (rsf) intended to improve credit conditions for poor people in the United States during first decades of the twentieth century—created a new class of lenders who could legally make small loans at interest rates exceeding those allowed for banks. By the 1930s, about two-thirds of the states had passed the usll. Econometric models show that urbanization, state-level economic characteristics, and the nature of a states banking system all affected the chance of passage. That party-political affiliations had no effect is consistent with the uslls “progressive” character. The passage of the usll in one state, however, made passage less likely in neighboring or similar states. The evidence suggests that the rsf only imperfectly understood the political economy of the usll, and that a different overall approach might have produced a result closer to its real aims.

Institutionalizing Creative Destruction: Predictable and Transparent Bankruptcy Law in the Wake of the East Asian Financial Crisis

After the collapse of Enron, WorldCom and the associated corporate scandals in the United States, it is useful to reflect on how vigorously the system of American corporate governance was proffered as the cure for post-crisis Asian ‘crony capitalism’. Legal predictability and financial transparency were the stolid Anglo-Saxon virtues that were supposed to help resolve the problems that culminated in the East Asian financial crisis of 1997. The crisis unleashed a flurry of interest in financial architecture and institutional re-engineering not only because it created a political opportunity for change, but also because it seemed that East Asian developmentalism had gotten its comeuppance. Now, however, former Treasury Secretary Lawrence Summers’ dramatic claim that: ‘the single most important innovation shaping that market [the American capital market] was the idea of generally accepted accounting principles. The transparency implicit in the generally accepted accounting principles (GAAP) promotes efficient market responses to change, and it supports stability’ (Summers 2000: 10) seems faintly ridiculous. The ability of Enron management to undermine and corrupt the independence of their auditors, the then-prestigious but now defunct accounting firm Arthur Andersen, revealed the gaps in GAAP and showed how transparency could be turned into opacity (Demski 2003). Yet, just as it was a mistake to dismiss East Asian developmentalism after the 1997 crisis, it would also be an error to overreact to Enron-like developments.

Homo economicus and Homo politicus: non-economic rationality in the early 18th century London stock market

The case of the early 18th-century London stock market is used to evaluate economic and sociological theones of market trading. Data from 1712 on shares in two companies (the Bank of England and the East India Company), and on trading among three different groups (political parties, ethnic-religious groups, and guilds) are used to show how economic theories of rational trading do not account for market behavior, even though the 1712 London stock market was a highly centralized, organized and active capital market. Trading was embedded in domestic and mternational politics as party groups used the market to control joint-stock companies, and as ethnic-religious groups used the market to provide financial support for Britains war with France In addition to economic goals, political goals were pursued in the market.

Epistemological conflicts and institutional impediments: The rocky road to corporate bankruptcy reforms in Korea

Notes on Usage About the Contributors List of Figures 1. Introduction 2. The Korean Constitutional Court, Judicial Activism and Social Change 3. The Paralysis of Legal Education in Korea 4. The Prosecution of Corruption in South Korea: Achievements, Problems and Prospects 5. Korean Criminal Law and Democratization 6. The Emergence of Formalized Intermediate Norms in Korea: The Case of Sexual Harassment 7. A Look at Chaebol Codes of Conduct 8. Epistemological Conflicts and Institutional Impediments: The Rocky Road to Corporate Bankruptcy Reforms in Korea 9. Korean Labour Law Reform: Evaluation and Future Prospects 10. Controlling Foreign Migrant Workers in Korea 11. The Unfulfilled Promise of Korean Telecommunications Reform 12. Negotiating Values and Law: Environmental Dispute Resolution in Korea Index

Book Review Essay: What's New about the New Institutionalism?: Handbook of New Institutional EconomicsMénardClaudeShirleyMary M., eds. Dordrecht, the Netherlands: Springer, 2005. 884 pp.

Do not read this book like I did, that is, beginning with chapter 1 and continuing through chapter 32, cover to cover. It requires a herculean effort, with lots of coffee and no small measure of self-discipline. A handbook isn’t a page-turner of a novel, or a research monograph that elaborates a sustained argument. Rather, it is a reference compendium, an encyclopedia devoted to a special topic. One should dip into a handbook on an as-needed basis, in pursuit of a summary treatment of a particular topic or an up-to-date overview of a literature. And since handbooks are composed of a large number of stand-alone chapters, one can read such books chapter by chapter, in any particular sequence. Precisely because the chapters are so exhaustive in coverage, they are also exhausting to read all at once.