Accounting, Organizations and Society 37 (2012) 361–381

Contents lists available at SciVerse ScienceDirect

Accounting, Organizations and Society

journal homepage: www.elsevier .com/ locate/aos

The political economy of financial harmonization: The East Asianfinancial crisis and the rise of international accounting standards

Patricia J. Arnold ⇑Sheldon B. Lubar School of Business, University of Wisconsin–Milwaukee, P.O. Box 742, Milwaukee, WI 53201, United States

0361-3682/$ - see front matter � 2012 Elsevier Ltdhttp://dx.doi.org/10.1016/j.aos.2012.05.001

⇑ Tel.: +1 414 229 3837; fax: +1 414 229 6957.E-mail address: patriciajarnold@sbcglobal.net

a b s t r a c t

In the aftermath of the East Asian financial crisis, western nations established a new inter-national financial architecture that relied upon enhanced financial transparency and inter-national financial standards, including international financial reporting and auditingstandards, to govern an expanding and crisis-prone international financial system. Thispaper examines the West’s response to financial crisis in the late 1990s and its implicationsfor the rise and diffusion of international accounting standards from a theoretical perspec-tive that blends institutional analysis and political economy. The aim is to understand howthe history of accounting has both shaped and been shaped by transformations in the late20th century international political economy where financial capital and the power of thefinancial sector play an increasingly central role in the process of accumulation.

� 2012 Elsevier Ltd. All rights reserved.

1 The term harmonization refers to standardization of laws, rules, andregulations governing commercial activities across national borders.Accounting harmonization refers to the standardization of financialreporting standards (i.e. the rules governing corporate financial reporting),auditing standards (i.e. the rules governing the conduct of audits) and/orother accounting-related rules and regulations such as licensing andqualification requirements or ethics rules.

2 Memorandum of Understanding between the Financial Accounting Stan-

Introduction

Since the mid 1990s, the institutional arrangementsgoverning financial accounting and auditing practice,which were organized at the national level by state regula-tors and professional associations for the better part of the20th century, internationalized at a surprisingly rapidpace. This transformation is evident in the developmentand widespread diffusion of international financial report-ing standards. Standards set by a supra-national body, theLondon-based International Accounting Standards Board(IASB) and its predecessor, the International AccountingStandards Committee (IASC), catapulted from relativeobscurity in the early 1990s to become universally recog-nized world standards today. Use of International FinancialReporting Standards (IFRS) is now required or permitted inover 100 countries, including the member nations of theEuropean Union. Even in the United States, where supportfor domestic adoption of IFRS has been mixed, progress

. All rights reserved.

toward harmonization1 has gained ground following aseries of regulatory shifts, including the 2002 NorwalkAgreement to achieve convergence between US and interna-tional financial reporting standards, and the 2007 Securitiesand Exchange Commission’s (SEC) decision to allow foreigncompanies to use IFRS in SEC filings without reconciliationto US standards.2 Although less prominent than the rise ofIFRS, the formalization of international auditing standardshas, likewise, gained momentum in recent years (see Hum-phrey & Loft, 2009; Humphrey, Loft, & Woods, 2009; Loft &Humphrey, 2006).

dards Board and the International Accounting Standards Board, Norwalk,Connecticut, September 19, 2002 (www.fasb.org/memorandum.pdf,accessed February 12, 2010); Securities and Exchange Commission PressRelease 2007-235, November 15, 2007 (www.sec.gov/news/press/2007/2007-235htm, accessed February 12, 2010).

362 P.J. Arnold / Accounting, Organizations and Society 37 (2012) 361–381

The surprisingly rapid pace of accounting harmoniza-tion in recent decades has inspired a stream of interdisci-plinary accounting research aimed at explaining the riseof international financial reporting and auditing standards(for example see: Bhimani, 2008; Botzem & Quack, 2009;Camfferman & Zeff, 2007; Chau & Taylor, 2008; Chiapello& Medjad, 2009; Humphrey & Loft, 2009; Humphreyet al., 2009; Loft & Humphrey, 2006). Interest in the forcesdriving accounting harmonization also extends beyond theaccounting literature to the broader field of social sciences,where sociologists and political scientists have turned tothe study of accounting harmonization in order to under-stand emerging forms of global economic governance(see: Armijo, 2001; Botzem, 2008; Eaton, 2005; Martinez-Diaz, 2005; Mattli & Büthe, 2003, 2005; Nölke & Perry,2007; Perry & Nölke, 2005, 2006; Porter, 2005; Posner,2009; Simons, 2001).

This study contributes to this literature by examiningone episode in the history of international accounting har-monization. The research focuses on an event that theIASB’s first Chairman, David Tweedie, frequently cites asa major turning point in the history of internationalaccounting, namely the East Asian financial crisis of1997–1998 (Street, 2002; Tweedie, 2002, 2008). In theaftermath of the East Asian crisis, finance ministers andcentral bank governors from the Group of 7 (G-7) nations3

set in place a so-called ‘‘new international financial architec-ture’’ to address the problem of systemic instability withinthe international financial system that had been exposedby the crisis. The centerpiece of their plan to reform theinternational financial infrastructure was the creation of anew international organization, the Financial Stability For-um (FSF), and the endorsement of a set of 12 financial stan-dards and codes to govern the crisis ridden internationalfinancial system by bringing greater transparency to themarketplace. Significantly, the FSF selected internationalfinancial reporting standards and international auditingstandards as two of the 12 financial standards that wouldform the foundation for global financial governance. Subse-quent support for domestic accounting reforms within thedeveloping world from the Financial Stability Forum, theWorld Bank and the International Monetary Fund (IMF) con-tributed to the development and diffusion of internationalaccounting standards in several ways, both practical andideological.

The history of the rise of international accounting stan-dards in the wake of the Asian crisis is interpreted from atheoretical perspective that blends institutional analysisand political economy, an approach that I call macro-insti-tutional analysis.4 The lens of political economy allows us toexamine the relationship between the process of interna-tional institution building within the accounting field andthe transformation in late 20th century capitalism that Giov-

3 The Group of 7 (G-7) includes France, Germany, Italy, Japan, UnitedKingdom, United States and Canada.

4 Although the terminology is my own, the blending of institutionalanalysis and political economy is not a new concept; it is prominent in thework of economic sociologists, especially within the French regulationschool (Aglietta, 1976; Boyer, 1990, 2007). In a prior work (Arnold, 2009b), Imake a case for a broader conceptualization of institutional research inaccounting that includes a macro political and economic perspective.

anni Arrighi (1994, 2007) and others refer to as financializa-tion. The aim is to better understand how institutionaldevelopments within the accounting field, in this case therise of international accounting standards, have both shapedand been shaped by the ascendance of financial capital to adominant position within the world capitalist system.

The following section discusses the research methodol-ogy. Section three describes the international financialarchitecture that was set in place in the wake of the EastAsian crisis and the role that international accounting stan-dards played within this emerging system of global finan-cial governance. To answer the question of why accountingfigured so prominently in the new international financialarchitecture, the paper situates the history of the responseto the East Asian crisis and the G-7’s endorsement of inter-national accounting standards in the context of several fea-tures of the international political economy, including thestructural crisis of capitalism in the 1970s, the consequentrise of finance capital and dependence of the US and otheradvanced economies on the growth of the financial sector,the geopolitical influence of the United States in the 1990sas the organizing center of international capitalism, and USfinance ministers’ support for institutional ‘‘reform’’ withinemerging economies modeled on Anglo-American modesof financial governance in order to facilitate the growthand expansion of Western capital markets. The final sec-tions of the paper discuss the implications of G-7s responseto the East Asian financial crisis for the diffusion of interna-tional accounting standards, the international auditingindustry, and prospects for global financial stability.

Analytical approach and methodology

In contrast to international accounting research (Nobes& Parker, 1988) that emphasizes the embeddedness ofaccounting in national cultures and national institutionalforms, this interpretation of the G-7’s response to the EastAsian crisis and its implications for the development anddiffusion of international accounting standards adopts aworld-systems perspective (Arrighi, 1994, 2007; Waller-stein, 2004). Power (2009) maintains that the rapidity ofaccounting internationalization is less surprising if we rec-ognize that accounting has never been a distinctively na-tional affair; long before codification of accounting normsby standard setting bodies began in the mid-20th century,the basic elements of financial accounting had alreadybeen widely disseminated as part of what he calls a ‘‘worldsystem of accounting’’ which developed over centuriesrather than decades, and which accounts for the non-trivialdegree of similarity found across various national account-ing systems. Accordingly, Power (2009, p. 325) argues thatwe need to ‘‘rethink the very conception of the ‘interna-tionalization’ of financial accounting’’ and ‘‘redefine thestarting point’’ for international accounting research.Rather than taking national accounting systems as our pri-mary unit of analysis and viewing the rise of internationalaccounting standards in terms of a movement from na-tional to international accounting norms and the opposi-tion between forces of international standardization andnationally embedded institutional and cultural constraints,

5 Arrighi (2007, p. 92) argues that Marx’s characterization of the state asa committee for managing the affairs of the bourgeoisie is ‘‘probably asaccurate a description as any other’’ of the states that have served ascenters of capitalist accumulation in the West.

P.J. Arnold / Accounting, Organizations and Society 37 (2012) 361–381 363

Power (2009) calls for an international accounting researchagenda that takes the world system, rather than the nationstate, as the primary unit of analysis.

Methodologically, analysis at the world rather than na-tional level can focus on the cultural dimensions of whatMeyers, Boli, Thomas, and Ramirez (1997) call ‘‘world soci-ety’’ and/or the political and economic dimensions of theworld inter-state system (Arrighi, 1994, 2007). In the firstcase, the internationalization of accounting is, to para-phrase Power (2009), viewed in relation to the diffusionof a universalistic commercial culture over many centuries,which is currently expressed in norms of appropriatenessand agreement as to what constitutes ‘‘good’’ accountingshared by transnational networks of experts that populatethe accounting field. In the second case, accounting historyis conceptualized in relation to the development of capital-ism on a world scale, again over many centuries, whichcurrently takes form in the process of financialization, i.e.the dominance of financial capital over national and inter-national economies (Arnold, 2009a). This study adopts thesecond approach taking the political and economic dimen-sions of the world inter-state system as the primary focusof analysis in order to better understand the relationshipbetween the rise of international accounting standardsand the dynamics of late 20th century capitalism.

In a prior study of institutional approaches to interna-tional accounting research (Arnold, 2009b), I describe thisblend of institutional analysis and political economy as aform of macro-level institutional analysis, and distin-guished it from micro and mezzo-level institutional stud-ies. Marco institutional analysis can be defined as thestudy of the institutional arrangements governing econo-mies as a whole. Research at this level examines thelong-term historical processes whereby the institutionalarrangements governing economies come into being andchange in response to financial and economic crises, polit-ical mobilizations, and social struggles. It differs from tra-ditional political economy in the emphasis it places onthe importance of the institutional arrangements that reg-ulate capitalism across historical time. This blending ofpolitical economy and institutionalism is evident in thework of French regulation theorists (Aglietta, 1976; Boyer,1990) who pay particular attention to transformations inthe institutional mechanisms that have developed histori-cally to moderate capitalism’s tendency toward economiccrisis and social instability. Financial reporting and audit-ing are conceptualized as a component of the institutionalarrangements that govern contemporary capitalist econo-mies, and the world economy as a whole. Boyer (2007),for example, has used the regulation approach to arguethat historical cost accounting facilitated the Fordist re-gime of accumulation that characterized the post-WWIIera, while fair value accounting plays an integral part inthe finance-led economic regime that characterizes today’spolitical economy.

Although Power’s (2009) suggestion to view financialaccounting as a product of a universalistic and state-lesscommercial culture may well be the appropriate startingpoint for research on the role global networks of expertsplay in the diffusion of accounting norms, a political econ-omy of accounting must deal with the fact that the con-

temporary world system is organized as an inter-statesystem. Geo-politics, inter-capitalist rivalries, economicconflicts between nations at the core and periphery ofthe world system, and the pivotal role played by states,such as Britain in the 19th century and the United Statesin the 20th century, in organizing capitalism on a worldscale are critical components of this analysis.5

Drawing from Fernand Braudel’s history of the evolutionof capitalism as a world system, Arrighi (1994, 2005) arguesthat the organizing center of capital accumulation shiftedover time from the Italian city states in the 15th and 16thcenturies, to Holland in the 17th century, to Britain in the19th century and to the United States in the 20th century.With each successive shift, the states that served as the cen-ter of capital accumulation were larger and more powerfulthan their predecessors, and capable of organizing capital-ism on an increasingly larger world scale. After WorldWar II, the United States played the pivotal role of organizerand promoter of world capitalism for several decades.Although Arrighi (2007) and others argue that US hege-mony entered into decline in the 21st century, during the1990s the US was, as Harvey (2010, p. 36) observes, ‘‘thecontrolling shareholder in global capitalism, able to callthe shots with respect to global politics’’ in part throughits influence over global economic institutions such as theWorld Bank and IMF. For this reason, this study emphasizesthe role the United States played in shaping the West’sresponse to the East Asian financial crisis and constructingthe post-crisis international financial architecture.

For this reason as well, the paper retains the often mis-understood terms Anglo-American capitalism and Anglo-American accounting, which for purposes of this studycan be interpreted as roughly synonymous with interna-tional capitalism and world accounting as they developedover the past two centuries first under British and then un-der US sponsorship. From a world systems perspective, An-glo-American capitalism is not an expression of US orBritish national culture, but rather an essentially interna-tionalist project that has been spread by way of colonialconquests, imperialism, and neo-colonial ventures. As a re-sult, the institutional arrangements governing the interna-tional economy have been largely shaped by the organizingcenters of capital accumulation and often, although notnecessarily, reflect norms and practices developed in Brit-ain and America. While it may be tempting to abandonthe term Anglo-American and replace it with the termworld accounting, to do so invites the misconception thataccounting practices are strictly a product of a universalis-tic commercial culture or anonymous market forces and,thus, devoid of the geopolitical underpinnings and eco-nomic relations of power that are so important to the studyof political economy.

The research draws from the literature on politicaleconomy and economic history including the works of Ar-righi (1994, 2007), Harvey (2005, 2010), Brenner (2002),Epstein (2005) and others to describe the transformation

364 P.J. Arnold / Accounting, Organizations and Society 37 (2012) 361–381

of late 20th century capitalism and the phenomenon offinancialization. The sections of the paper dealing withthe G-7’s response to the East Asian financial crisis drawfrom the work of Wade (2000, 2007), Cumings (1998)and other critics of the so called ‘‘new international finan-cial architecture’’ that was established in the aftermath ofthe East Asian crisis. In their analysis (see especially Wade,2007), the West’s response to the East Asian crisis repre-sented an effort, led by the United States, to seize uponthe crisis to promote the spread of Anglo-American stylecapitalism to East Asia and the developing world by insti-tuting a relatively weak financial governance regime, fa-vored by the financial sector, based upon transparency,international financial standards, and market self-discipline.

While the study relies on insights drawn from the polit-ical economy and economic history literature for its inter-pretative framework and to identify the macro economicand political factors that shaped the G-7s response to theAsian crisis, the historical research on accounting’s role inthe international financial infrastructure, and theimplications of the Financial Stability Forum’s selection ofaccounting and auditing as key elements of global financialgovernance is based on primary sources. Primary sourcematerials, including speeches, press releases, published pa-pers, reports and other documents, were obtained from theonline archives of the Financial Stability Board, the USTreasury Department, the IMF, the World Bank, the Bankof International Settlements, and the University of Toron-to’s G-8 Information Center, among others. Wherever pos-sible historical events are documented with references toprimary sources, including the writing and speeches ofindividuals whose involvement in the West’s response tothe crisis gave them access to knowledge of what was hap-pening behind the scenes. Evidence and interpretations ofevents were evaluated by triangulating between multiplesources. The archival research was supplemented by inter-views with participants who observed the West’s responseto the crisis from positions within relevant international ornational regulatory organizations, including the Interna-tional Accounting Standards Committee, the InternationalForum for Accountancy Development, the Security andExchange Commission, and the World Bank.

6 An exception to the consensus on the need for a new internationalfinancial architecture was the position taken by the market fundamental-ists who opposed any government intervention in the economy includingIMF bailouts on the grounds that they exacerbated the moral hazardproblem. See Summers (1999b) for a discussion of this position.

7 For a more in-depth discussion of proposed responses to the East Asiancrisis see summaries by Culpeper (2000), Rogoff (1999), Soederberg (2001)and Summers (1999b).

8 The Tobin Tax, a tax on foreign currency transactions designed todiscourage short term speculation, was first proposed by Nobel Laureateeconomist, James Tobin, in the 1970s.

The East Asian crisis and the new international financialarchitecture

The East Asian financial crisis (1997–1998) began inThailand with a panicked run on the Thai Bhat in 1997 asshort term investors, which Blustein (2001) refers to as‘‘the electronic herd’’, pulled money out of the country.Contagion spread quickly throughout the region leadingto major IMF rescue programs in Thailand, Indonesia, andKorea. The financial turmoil was not limited to Asia; thelate 1990s witnessed a series of serious internationalfinancial upheavals including the Mexican peso crisis in1994–1995, the Russian debt crisis in 1998, the collapseof the US hedge fund, Long Term Capital Management, alsoin 1998, and the Brazilian currency crisis in 1999. Togetherthese events destabilized the international financial sys-

tem leading to calls for financial reform and the creationof a so-called ‘‘new international financial architecture’’.Soederberg (2001, p. 453) defines this architecture as ‘‘anemerging conjuncture of institutions, practices and dis-courses that aim to provide a managing infrastructure forthe movement of global capital flows.’’

While the seriousness and scale of these crises led towidespread consensus among Western economists, policyanalysts, politicians and finance ministers on the need to re-form the international financial system,6 there were funda-mental disagreements on the form reform should take. At therisk of some oversimplification, the various proposals forfinancial reform advanced in the wake of the East Asiancrisis can be grouped into three approaches.7 The first ap-proach blamed the crisis on overly rapid financial liberaliza-tion, which allowed capital to flow freely across bordersencouraging short-term financial speculation and increasingthe risk of capital flight and crisis. Proponents of thisapproach, including Nobel prize winning economist PaulKrugman (1998) and pro-globalization economist JagdishBhagwati (1998) among others, advocated placing con-straints on cross-border financial speculation by allowing orencouraging governments to re-impose capital controls ifneeded to prevent the kind of wholesale capital flight thathad proven so destabilizing in Asia. During the East Asian cri-sis, the government of Malaysia adopted this approach whenit imposed emergency capital controls in September 1998 tocurb capital flight out of the country. Advocates of constraintson the global movement of capital also favored transactionstaxes, such as the Tobin Tax,8 to discourage short-termfinancial speculation and raise revenue to mitigate the socialimpacts of economic crises (see Crotty and Epstein (1999)and Pollin, Baker, and Schaberg (2001) for examples).

The second approach called for the creation of strongerinternational institutions with enhanced powers to governthe international financial system in order to prevent and/or contain instability. Examples of this approach to reforminclude the proposal for an international financial regula-tor, advanced by UK economist John Eatwell (Eatwell &Taylor, 2000) among others, and a proposal for an interna-tional credit insurer, advocated by hedge fund managerGeorge Soros (1998). Proposals for an international bank-ruptcy court were also advanced. Anne Krueger (2001),then First Deputy Managing Director of the InternationalMonetary Fund, for example, called for the establishmentof an international bankruptcy mechanism that would givethe IMF power to restructure sovereign debt (Wade, 2007).Within East Asia, Japan’s proposal for the creation of anAsian Monetary Fund, as a regional alternative to the USdominated International Monetary Fund (Lipscy, 2003),

P.J. Arnold / Accounting, Organizations and Society 37 (2012) 361–381 365

represents a regional variation on this institutional-build-ing approach to strengthening the international financialinfrastructure.

The third approach was the least radical; it blamed theEast Asian financial crises on some combination of cronycapitalism, poor financial governance, and a lack of trans-parency within emerging economies. Advocates of thethird approach, including United States Treasury Depart-ment chiefs Robert Rubin (1998) and Lawrence Summers(1999b), opposed constraints on global financial integra-tion, and called instead for domestic reforms withinemerging economies to strengthen their financial infra-structures and bring them into line with international bestpractices. Mervyn King (1999), then Deputy Governor ofthe Bank of England, similarly favored domestic financialreforms aimed at greater transparency and accountabilitycalling it a ‘‘middle way’’ between calls for an internationallender of last resort and calls for permanent capital con-trols that would constrain the free movement of capitaland undermine global financial liberalization. With the iso-lated exception of Malaysia’s temporary capital controls,proposals for macro economic reforms advocated by pro-ponents of the first two approaches were never imple-mented. Instead, the third approach focused on micro-prudential regulation, improved transparency, domesticfinancial reform, and adoption of international financialstandards and codes of best practice by developing nationsbecame the framework for the G-7s response to the crisis.

The West’s efforts to construct a new internationalfinancial architecture in the aftermath of the Asian crisiswas coordinated by the finance ministers and central bankgovernors of the Group of 7 (G-7) nations: Canada, France,Germany, Italy, Japan, the UK and the US.9 The appendixpresents a timeline depicting the chronology of the EastAsian crisis and the G-7’s response. The G-7 holds meetingsboth at the level of heads of state and at the level of financeministers and central bank governors; unless otherwiseindicated the events and decisions described in this sectionand in the appendix were initiatives of the G-7 finance min-isters and central bank governors.

On October 30, 1998, G-7 finance ministers and centralbank governors issued a statement in which they agreedto cooperate on reforms to strengthen the internationalfinancial system along the lines of the third approach dis-cussed above. They agreed to carry forward reforms throughappropriate international institutions and forums designedto (1) increase transparency and openness of the interna-

9 Earlier in November 1997, President Clinton and other leaders of PacificRim countries organized a gathering of finance ministers and central bankgovernors from 22 nations to advance reform of the global financialarchitecture (IMF, Guide to Committees, Groups and Clubs, September 30,2010, accessed December 19, 2010 at www.imf.org/external/np/exr/facts/groups.htm). The G-22 issued recommendations for reform in October1998, including a recommendation that ‘‘priority be given to compliancewith and enforcement of high quality accounting standards’’ (G-22Working Group on Transparency and Accountability, Report on the Inter-national Financial Architecture, October 1998 accessed on 28 March 2010http://www.imf.org/external/np/g22/index.htm-22). The G-7 subsequentlyendorsed the G-22 Report of the Working Group on Transparency andAccountability in full (King, 1999). According to Armijo (2001), Europeandissatisfaction with US dominance of the G-22 prompted the G-7’s creationof the Financial Stability Forum in 1999.

tional financial system, (2) identify and disseminate inter-national principles, standards and codes of best practice,(3) strengthen incentives to meet these international stan-dards and (4) strengthen official assistance to help develop-ing countries reinforce their economic and financialinfrastructures. They further agreed on the need to set inplace a process by which the IMF would conduct surveil-lance of national financial sectors and their regulatory andsupervisory regimes and report on compliance with disclo-sure standards and codes of conduct. Lastly, the finance min-isters acknowledged the need for standards of transparencyin the private sector as well as the public sector, and calledupon the International Accounting Standards Committee(IASC) to finalize a proposal for a full range of internationallyagreed accounting standards by 1999. The InternationalOrganization of Securities Commissions (IOSCO), the Inter-national Association of Insurance Supervisors (IAIS) andthe Basel Committee on Banking Supervision were directedto complete a timely review of IASC’s standards.10

At their Bonn meeting in February 1999, G-7 financeministers and central bank governors created a new inter-national financial organization, the Financial Stability For-um (FSF) based upon the recommendations of a report byHans Tietmeyer, then President of the Deutsche Bundes-bank, that they had commissioned the previous year.11

The purpose of the Forum was to bring together nationalauthorities, international financial institutions, and interna-tional regulatory bodies on a regular basis to ‘‘assess issuesand vulnerabilities affecting the global financial system andidentify and oversee the actions needed to address them’’(Tietmeyer, 1999, p. 7). The Financial Stability Forum’s mem-bership was composed of the finance ministers, central bankgovernors and other regulatory authorities from the G-7countries and other significant international financial centersas well as the IMF, the World Bank, international regulatoryand supervisory bodies, and committees of bank experts.Fig. 1 lists the Forum’s membership as of their second meet-ing in 1999. Although the Group of 20 (G-20) was establishedas a consultative body at the G-7 finance ministers meeting inSeptember of 1999 to broaden involvement and lend legiti-macy to the Financial Stability Forum’s initiatives, the crea-tion of the Forum was initiated by the G-7, and itsmembership continued to be dominated by finance minis-ters, central bank governors and financial regulators fromthe G-7 until its reorganization into the Financial StabilityBoard in 2009.12

10 Declaration of G7 Finance Ministers and Central Bank Governors, October30, 1998 (accessed on 27 May 2011 at www.imf.org/external/np/g7/103098dc.htm).

11 At their October 3, 1998 meeting, G-7 ministers asked Han Tietmeyer toconsult with relevant organizations and recommend any new structuresand arrangements that might be required to promote cooperation andcoordination between the various international supervisory bodies and theinternational financial institutions (Statement by the G7 Finance Ministersand Central Bank Governors, Washington, DC, October 3, 1998, accessed on27 May 2011 at www.g8.utoronto.ca/finance/fm100398.htm).

12 For a history of the founding of the Financial Stability Forum and itssuccessor the Financial Stability Board see: www.financialstablity-board.org/about/history.htm (accessed December 19, 2010). For informa-tion on the founding of the G-20 see the International Monetary Fund’s,Guide to Committees, Groups and Clubs, September 10, 2010 (accessed 19December 2010 at www.imf.org/external/np/exr/facts/groups.htm).

National Authorities (25 representatives)

Australia: Reserve Bank of Australia

Canada: Department of Finance Bank of Canada Office of the Superintendant of Financial Institutions

France: Ministry of the Economy Commission Bancaire Banque de France

Germany: Ministry of Finance Bundesaufsichtsamt f r das Kreditwesen Deutsche Bundesbank

Hong Kong: Hong Kong Monetary Authority

Italy: Ministry of the Treasury Banca d’Italia CONSOB

Japan: Ministry of Finance Financial Supervisory Agency The Bank of Japan

Netherlands: De Nederlandsche Bank

Singapore: Monetary Authority of Singapore

United Kingdom: Bank of England Financial Services Authority HM Treasury

United States: Department of the Treasury Securities and Exchange Commission Board of Governors of the Federal Reserve System

International Financial Institutions (6 representatives) International Monetary Fund (2) The World Bank (2) Bank for International Settlements Organisation for Economic Cooperation and Development

International Regulatory and Supervisory Groupings (6 representatives) Basel Committee on Banking Supervision (2) International Organisation of Securities Commissions (2) International Association of Insurance Supervisors (2)

Committees of Central Bank Experts (2 representatives) Committee on Payment and Settlement Systems Committee on the Global Financial System

Source: BIS, Background brief made available to the Press at the 2nd meeting of the Financial Stability Forum on 15 September 1999 (www.bis.org/press/p990916.htm). The IASB became a member in 2008 (IASB correspondence dated 7 June 2011).

Fig. 1. 1999 Financial Stability Forum membership.

366 P.J. Arnold / Accounting, Organizations and Society 37 (2012) 361–381

At the Forum’s inaugural meeting in Washington, DCin April of 1999, members set up three working groupsto recommend policy on highly leveraged institutions,capital flows, and offshore financial centers. The Forumalso agreed to create a compendium of standards listinginternationally accepted standards and codes of bestpractice. In advance of the Forum’s second meeting inParis in September of 1999, a draft compendium wascomplied.13 The draft compendium consisted of 43 eco-nomic and financial standards all of which were formu-

13 Financial Stability Forum, Background brief made available to the Press atthe 2nd meeting of the Financial Stability Forum, September 16, 1999(accessed 19 Dec. 2010 at www.bis.org/press/p990916.htm).

lated by members of the Forum; accounting standardswere not among them. Over the course of the followingyear, FSF members recommended additional standards forinclusion in the compendium, including financial reportingand auditing standards, bringing the total number of pro-posed standards to 64.14

At the third Financial Stability Forum meeting in Singa-pore in March of 2000, members agreed to focus on a com-pendium of 12 financial standards and codes, culled fromthe list of 64, which they designated as ‘‘key’’ to sound

14 Issue Paper of the Task Force on Implementation of Standards, prepared forthe 25-26 March 2000 Meeting of the Financial Stability Forum 25-26, March15, 2000 (accessed 31 May 2011 at (www.andrewsheng.com/downloads/publications/021216taskforceonimplementationofstandards.pdf).

The Financial Stability Forum’s 12 Key Standards for Sound Financial Systems

Area Standard Issuing Body

Macroeconomic Policy and Data Transparency

Monetary and Code of Good Practices on International Monetary Fund financial policy Transparency in Monetary and transparency Financial Policies

Fiscal policy Code of Good Practices on Fiscal International Monetary Fund transparency Transparency

Data Special Data Dissemination Standards & International Monetary Fund dissemination General Data Dissemination Standards

Institutional and Market Infrastructure

Insolvency Insolvency and Creditor Rights World Bank

Corporate Principles of Governance Organization for Economic Governance Co-operation and Development

Accounting International Accounting Standards International Accounting Standards Board

Auditing International Auditing Standards International Federation of Accountants

Payment and Core Principles for Systematically Committee on Payment & Settlement Important Payment Systems Settlement Systems (CPSS)

Recommendations for Securities CPSS/IOSCO Settlement Systems

Market integrity Recommendations of the Financial Action Financial Action Task Force Task Force on Money Laundering and Terrorism

Financial Regulation and Supervision

Banking Core Principles for Effective Banking Basel Committee on Banking supervision Supervision Supervision

Securities Objectives and Principles of Securities International Organization of regulation Regulation Securities Commissions (IOSCO)

Insurance Insurance Core Principles International Association of supervision Insurance Supervisors

Source: Financial Stability Forum (now the Financial Stability Board), www.financialstabilityboard.org/cos/key_standards.htm, accessed on 14 January 2010.

Fig. 2. The Financial Stability Forum’s 12 key standards for sound financial systems.

P.J. Arnold / Accounting, Organizations and Society 37 (2012) 361–381 367

financial systems and targeted for priority implementa-tion.15 These standards and their issuing bodies are shownin Fig. 2.

Two of the 12 financial standards given priority by theForum are accounting standards, namely (1) InternationalAccounting Standards16 set by the International AccountingStandards Board (IASB), and (2) International Auditing Stan-dards set by the International Federation of Accountants(IFAC). The FSF originally designated the International

15 Financial Stability Forum Press Release, Financial Stability Forumendorses policy actions to reduce global financial vulnerabilities, March, 26,2000 (accessed 19 December 2010 at www.financialstabilityboard.org/press/pr_000325.pdf).

16 The FSF used the term ‘‘international accounting standards’’ here torefer to International Financial Reporting Standards set by the IASB and itspredecessor the IASC.

Accounting Standards Committee (IASC) as the globalaccounting standard setter; when the IASB was establishedto succeed IASC in 2001, it replaced IASC in thecompendium.

The selection of accounting and auditing standards forinclusion in the Financial Stability Forum’s list of key stan-dards is notable because private sector bodies set interna-tional accounting and auditing standards. Other standardsin the Forum’s compendium are set by organizations com-posed of national governments or national regulators.17

17 Except for the private sector accounting and auditing standard setters,all other standard setters were also members of the Financial StabilityForum. The IASB did not become a member of the Forum until 2008(correspondence with the IASB dated 7 June 2011); the IFAC has never beena member.

18 The International Institute of Finance (IIF) is a politically influentialglobal association of financial institutions; its membership includes theworld’s largest commercial and investment banks (http://www.iif.com).

19 See Epstein (2005) for a discussion of various definitions of the term‘‘financialization’’.

368 P.J. Arnold / Accounting, Organizations and Society 37 (2012) 361–381

The IOSCO (International Organization of Securities Com-missions) and IAIS (International Association of InsuranceSupervisors) are made up of national securities and insur-ance regulators. The International Monetary Fund (IMF),the World Bank, the Financial Action Task Force (FATF), theOrganization for Economic Co-operation and Development(OECD) and the Bank for International Settlements (BIS),which is home to the Basel Committee on Bank Supervision(BCBS) and the Committee on Payment and Settlement Sys-tems (CPSS), are all inter-governmental bodies. In contrast,private sector groups issue international accounting andauditing standards. The IASC/IASB is an independent privatesector body and the IFAC is an association of professionalassociations representing commercial auditors.

The IMF and World Bank were charged with responsi-bility for monitoring countries’ implementation and com-pliance with the FSF’s standards and codes. As part oftheir joint Financial Sector Assessment Program (FSAP),the IMF and World Bank began conducting detailed coun-try-by-country assessments of progress toward implemen-tation, and publishing Reports on the Observance ofStandards and Codes (ROSC). Wade (2007) criticizes thesearrangements, which he refers to as the ‘‘standards-sur-veillance-compliance’’ regime, on three counts. First, theresponse to the East Asian crisis was drafted by a US-ledcoalition of western governments, international organiza-tions, financial firms, and think tanks from advanced capi-talist states, while the ‘‘global South’’ had almost no voicein the matter (Wade, 2007, p. 115). Second, more substan-tive reforms of the international financial system, embod-ied in proposals for the creation of a internationalfinancial regulator, a international bankruptcy court, aninternational deposit insurance corporation, were rejectedlargely because of the ‘‘unwillingness of private financialmarkets to accept greater international authority, whichwould afford them less latitude than a world in which avariety of nation-states hold jurisdiction’’ (Wade, 2007, p.119). Lastly, Wade argues that the ‘‘standards-surveil-lance-compliance’’ regime set in place by the FSF fosteredthe ‘‘Anglo-Amercianization’’ of emerging economies. Inhis words:

(I)t pushed national economies toward one particularkind of capitalism – the Anglo-American type – andshrunk the scope of ‘policy space’ for these countriesstill further than did the prescriptions of the Washing-ton Consensus. Where the latter insisted on liberalizingthe market, deregulation and fiscal austerity, the Post-Washington Consensus could be summed up by thecommandment ‘‘standardize the market’’ (2007, p. 116).

The following sections discuss the macro political andeconomic underpinnings of the FSF’s choice of accountingstandards as key components of this ‘‘standards-surveil-lance-compliance’’ regime and assesses the implicationsof that choice.

The political economy of accounting harmonization

University of Chicago historian, Bruce Cumings (1998, p.54) writes that at the height of the East Asian financial

crisis in 1997, US Secretary of the Treasury Robert Rubinpersonally held up the IMF bailout of Korea for 10 hourswhile he pushed Korea to adopt new accounting standards.Such high level advocacy for accounting reform is not anisolated incidence. In comments on the East Asian crisismade in 1999 to the Institute of International Finance(IFF),18 Deputy Secretary of the Treasury Lawrence Sum-mers, who would succeed Rubin as head of the US TreasuryDepartment in July of 1999, underscored his view of theimportance of accounting standards to the creation of aninternational financial infrastructure by stating:

If one were writing a history of the American capitalmarkets I think one would conclude that the single mostimportant innovation shaping the market was the idea ofgenerally accepted accounting principles. GAAP are not asingle institution. They are not a single magic bullet.They are an ongoing process that really is what makesour capital market work and what makes it as stable asit is. Very much the same kind of thing is necessary inthe emerging economies (Summers, 1999a, p. 3).

Alan Greenspan (1999), Chairman of the US Federal Re-serve System, likewise, spoke publicly about the need forimproved accounting within emerging economies notingthat:

It is no coincidence that the lack of adequate accountingpractices, bankruptcy provisions, and corporate gover-nance have been mentioned as elements of several ofthe recent crises that so disrupted some emerging-mar-ket economies. Had these been present, along with thecapital markets they would have supported, the conse-quences of the initial shocks of early 1997 might wellhave been quite different.

Rubin, Summers and Greenspan’s support for generallyaccepted accounting standards is remarkable in that itdemonstrates that support for accounting reform in thewake of the East Asian crisis came from high echelons ofpower within the US Treasury Department and centralbank.

Why did accounting standards rise to such prominencein the minds of US finance ministers and central bankers?The answer to this question, which bears directly on ourquestion of why international accounting standards fig-ured prominently in the ‘‘new international financial archi-tecture’’, established by the G-7 in the wake of the EastAsian crisis, is rooted in the late 20th century economictransformation known as financialization.

Financialization

Economic historians and political economists use theterm ‘‘financialization’’ to describe the transformation thatoccurred in the international political economy during thelast quarter of the 20th century.19 The 1980s and 1990s saw

20 Unlike Arrighi (2007) who attributes the revival of the US economy inthe 1990s to the monetarist counter-revolution that began in 1979–1982,Brenner attributes the revival to the Plaza Accord, which stimulated USmanufacturing by devaluing the dollar, but failed to solve the problem ofover production on a world scale.

21 For evidence of the increasing importance of the finance sector to theUS economy see Foster and Magdoff (2009), especially Chart 2.4 (p. 55) andChart 6.2 (p. 123). As these charts show, during the 1970s, US manufac-turing profits declined steadily as a percent of total domestic profits; after1985 financial profits began to take up the slack. In 1991, financial industryprofits ($122.1 billion) for the first time exceeded manufacturing profits($99.4 billion). (Table B-91: Corporate profits by industry 1960–2009.Economic Report of the President. Transmitted to Congress February 2010.Washington: DC: US Government printing office, accessed on 15 March2010 at http://www.whitehouse.gov/administration/eop/cea/economic-report-of-the-president).

P.J. Arnold / Accounting, Organizations and Society 37 (2012) 361–381 369

significant changes in the world economy which includednot only the widely studied phenomenon of globalization,but also financialization, which has been defined as a ‘‘pat-tern of accumulation in which profit making occurs increas-ingly through financial channels rather than through tradeand commodity production’’ (Krippner, 2004, p. 14 cited inEpstein (2005, p. 3)). The processes of financialization andeconomic globalization, as well as the rise of neoliberal ide-ologies to rationalize them, occurred contemporaneously.Duménil and Lévy (2005), however, contend that financial-ization is critical to understanding the contemporary globalpolitical economy. In their analysis, ‘‘it is finance that dic-tates the forms and contents in the new stage of internation-alization; it is not internationalization or globalization thatcreated the insuperable necessity for the present evolutionof capitalism’’ (Duménil & Lévy, 2005, p. 17).

In his study of late 20th century political economy,Brenner (2002) traces the transformation in capitalismfrom the post World War II boom to the speculative bub-bles of the late 1990s and 2000s. In Brenner’s analysis,the so-called ‘‘new economy’’ of the 1990s failed to resolvethe structural crisis that had surfaced in the 1970s as a re-sult of uneven development, intensifying inter-capitalistcompetition between the US, Japan and Germany, globaloverproduction, and declining rates of profit. Harvey(2010, p. 45), likewise, attributes the transformation ofthe late 20th century political economy to the 1970s crisis,which he describes as an over-accumulation crisis; profitrates were too low to attract reinvestment of capital sur-plus leading to stagnation and economic decline. In re-sponses to declining profits and stagnation in the realeconomy, the United States adopted a host of monetary,fiscal, economic and (de)regulatory policies, as well asaggressive foreign and trade policies in order to open chan-nels for accumulation via the financial sector. The UnitedStates was not alone in this effort; the United Kingdom ac-tively promoted the growth of its financial sector duringthe 1980s and 1990s (Hutton, 1996), and other developedwestern nations benefited from and supported financialliberalization and international capital mobility (Abdelal,2007). Nonetheless, given its hegemonic position withinthe inter-state capitalist system the 1980s and 1990s, theUnited States took the lead in furthering financializationon a global level by encouraging international capitalmobility and the expansion of global financial markets.

Financialization and the accompanying expansion ofintegrated international financial markets was not a spon-taneous event; nor, was it driven solely by technologicaladvances in telecommunications as Friedman (2000) andothers maintain. It was the product of conscious state-led, political efforts to dismantle the institutional mecha-nisms that had been set in place to control cross bordercapital flows following the Great Depression of the1930s. As Schor (1992) observes, the degree of interna-tional financial openness has oscillated historically in re-sponse to economic crisis, social struggles and politicalinterventions. The 19th century world economy was char-acterized by a high degree of financial openness and crossborder capital mobility (Polanyi, 1944). In the aftermath ofthe Great Depression in the 1930s, political and institu-tional controls were established over international capital

flows, and a system of non-integrated, nationally based,financial systems was set in place that lasted into the1970s. Just as the post-World War II political economywith its characteristic Keynesian economic policies, capitalcontrols, and national financial systems was the product ofconscious policies and political compromises (Schor,1992), the return of financial liberalization and the re-inte-gration of world financial markets in the 1980s and 1990swas similarly the product of state action and politicalinterventions. The world economy was reshaped in the lastquarter of the 20th century by state-led policies to disman-tle Keynesian institutions, to eliminate capital controls, lib-eralize national economies, and to open national bordersonce again to international capital investment and crossborder capital flows (Helleiner, 1994; Kapstein, 1994;Schor, 1992).

In Arrighi’s (2007, p. 230) view, financialization (whichhe characterizes, quoting Braudel, as the ‘‘capacity of fi-nance capital to take over and dominate for a while at leastall the activities of the business world’’) provided a tempo-rary fix to the problem of economic stagnation. Financial-ization helped to revive economic prosperity in the1990s,20 but it did so at the cost of making the US economyand its position within the world economy increasinglydependent on the growth and welfare of the financial sec-tor.21 In her analysis of the East Asian crisis, Soederberg(2001, p. 457) compares this dependency on the financialsector to the relationship between Dr. Frankenstein andhis monster in Mary Shelley’s classic novel Frankenstein.

Through the monster’s exploits, he gains increasinglymore power over his creator – interestingly enough lar-gely through neglect. In similar fashion, through almosta decade of imposing the imperatives of free capitalmobility the Washington Consensus has not onlyincreased exponentially the power of the internationalfinancial markets over states but also over the UnitedStates. As a consequence, the viability of U.S. structuralpower has become ever more dependent on the healthand stability of global financial markets – of which largeU.S. based financial investment institutions are signifi-cant actors

Financialization increased the political power of thefinancial sector, which by the late 1990s exercised sub-stantial influence in Washington, DC. Bhagwati (1998, p.7) attributes the US-led response to the East Asian crisis

370 P.J. Arnold / Accounting, Organizations and Society 37 (2012) 361–381

largely to the close ties between Wall Street and the USTreasury Department, an alliance that he refers to as the‘‘Wall Street Treasury Complex’’. While the influence ofthe finance sector is critical to any understanding of the re-sponse to the Asian crisis, regulatory capture theories, suchas Bhagwati’s, tend to ignore the structural underpinningsof the financial sector’s political influence. In contrast, Har-ry Madgoff, Paul Sweezey, David Harvey, and other Marxistpolitical economists22 link the financial sector’s dispropor-tional influence in Washington to structural factors, namelythe crisis of capitalism that began in the 1970s and led in the1980s and 1990s to the dependence of western capitalismon finance sector growth and profitability to restore eco-nomic prosperity. In their view, the financial sector’s politi-cal power stems not only from its lobbying prowess, but alsofrom its structural importance to the US economy. As a re-sult, the belief that what was good for Wall Street was goodfor America and the world economy exercised influence overWashington policies in the 1990s and guided the US re-sponse to the East Asian crisis.

Political economists and economic historians fromBrenner to Arrighi have long warned that the late 20th cen-tury economic revival was unsustainable.23 Brenner (2002)was among the first to warn that the ‘‘new economy’’ of the1990s failed to resolve the underlying crisis of over produc-tion and over accumulation that characterized the worldeconomy in the 1970s. Based on his study of economic his-tory, Arrighi (1994, 2007) further contends that financializa-tion marked the beginning of the end of the era of USeconomic leadership in the world. Taking a long view of eco-nomic history, he observes that as the center of capital accu-mulation shifted over time from the Italian city-states in the15th and 16th centuries, to Holland in the 17th century, toBritain in the 19th century and to the United States in the20th century, each successive ‘‘cycle of accumulation’’24 fol-lowed a similar pattern of emergence and decline. The pat-tern began with a period of growth, followed by aneconomic downturn, and culminating in a period of financialexpansion that temporarily restored prosperity based onfinancial returns from credit markets and speculation. Ineach successive cycle, financialization foreshadowed theend of the epoch. Just as the center of capitalist accumula-tion shifted from Great Britain to the United States in thelast century, Arrighi (2007) argues that US hegemony overthe world system entered into decline in the 21st centuryas the center of productivity and economic growth shiftedto China.

22 See Foster and Magdoff (2009) for an intellectual history of economicthought on the relationship between production and finance from Keynes,to Minsky to Magdoff and Sweezy.

23 Although Brenner and Arrighi offer different, and at times opposingreadings of evolution of 20th capitalism from the post-war boom, tostagnation in the 1970s, to the bubble economy of the 1990s, they agreethat the late 20th century’s economic revival was unsustainable. For asummary of the debates between Arrighi and Brenner see Arrighi (2003).

24 Arrighi (2005) identifies four ‘‘cycles of accumulation’’ each spanning a‘‘long century’’: (1) the Genoese-Iberian cycle, extending from the 15thcentury through the early 17th century, (2) the Dutch cycle, extending fromthe late 16th century through the late 18th century, (3) the British cycleextending from the mid 18th century through the early 20th century, and(4) the US cycle, extending from the late 19th century through the early21st century.

In the 1990s, however, the mainstream economic viewwas that a ‘‘new economy’’ built upon services, particularlytelecommunications and financial services, could reversethe decline in profitability that began in the 1970s. Propo-nents of the ‘‘new economy’’ saw international financialleadership, open financial borders, free capital flows, glob-ally integrated financial markets, and expanded trade infinancial services as essential to continued US and worldeconomic prosperity. Moreover, as the following sectionsshow US finance ministers viewed international account-ing reform as a component of their efforts to promote glo-bal financial integration and the spread of Anglo-Americanfinancial markets.

Integrating East Asia into the world financial market

In the same speech to the financial industry in whichDeputy Secretary of the Treasury Summers (1999a, p. 1)extolled the virtues of generally accepted accounting prin-ciples as the cornerstone of an effective financial infra-structure, he summarized his vision of the role thatwestern finance would play in the world economy:

There are few things with as great a potential to raisehuman welfare than the creation of a safe and sustain-able system for the flow of capital from the developedworld to the developing one. The major industrialnations are crossing the threshold into an era of risingrates of retirement and much lower rates of labor forcegrowth . . .All of the world’s population growth over thenext 25 years – and the lion’s share the its growth inproductivity – will take place in the developing nations.The upshot is that we are heading into a period whenthere will be exceptional global benefits to successfuleconomic development in the developing world. And,make no mistake; a healthy capacity to mobilize capitalin these economies – because of the trade that itfinances, because of the technology it brings, andbecause of the opportunities it offers – has a veryimportant part to play in that development.

The development model that Summers is espousinghere is a neoliberal development model (Harvey, 2005)which depends upon financial liberalization – that is, onthe elimination of capital controls, the opening of emerg-ing economies to foreign investment and internationalfinancial markets, the dismantling of so-called national‘‘regulatory barriers’’ to trade in financial services, andthe standardization of world financial markets. Whileubiquitous today this development model was by nomeans unchallenged in the 1990s. The East Asian develop-ment model, the path to development followed by Japanand South Korea, offered a competing model of capitalistdevelopment that was at odds with the neoliberal agendaWashington promoted throughout the 1980s and 1990s.The East Asian development model was characterized bya strong state role in promoting economic development,nationalist economic and industrial strategies, and state-mediated capital directed toward large domestic firms try-ing to capture foreign markets (Cumings, 1998).

Cumings (1998) argues that during the Cold War, the USwas willing to tolerate the East Asian development model

27 Blustein (2001, p. 130) notes: ‘‘official figures indicated that Korean

P.J. Arnold / Accounting, Organizations and Society 37 (2012) 361–381 371

despite its East Asian allies’ unwillingness to accommodatewestern financial interests because of the important exam-ples they set for the rest of the developing world as highlysuccessful models of non-communist economic develop-ment. After the end of the Cold War, however, the majorreason for indulging the East Asian development modeldisappeared and the US sought not only to open Asianeconomies to western investment and finance, but moreimportantly, to destroy the competing model of capitalistdevelopment before it spread from Korea and Japan tothe rest of the developing world, including China. In Cum-ings’ analysis (1998, p. 45), ‘‘the deep meaning of the EastAsian crisis therefore lies in the American attempt to bringdown the curtain on ‘late’ development of the Japanese andKorean type.’’

Accordingly, when the financial crisis spread to Korea,the IMF’s rescue package was made conditional on majorrestructuring and financial liberalization.25 The terms ofthe IMF’s rescue of Korea, which were negotiated largelyfrom Washington (Blustein, 2001), insisted that Korea radi-cally restructure its financial sector to make it more trans-parent, market-oriented and open to western financialinstitutions. The agreement stipulated that Korea would al-low foreign financial institutions to participate in mergersand acquisitions, and establish bank subsidiaries and bro-kerage houses within Korea. Foreign banks would be al-lowed to purchase equity in Korean banks withoutrestrictions. Capital markets were liberalized by increasingceilings on foreign ownership of Korean shares from 26%to 55% and restrictions on foreign borrowing by corporationswere eliminated (IMF, 1997).

A demand for accounting reform went hand in handwith the demand to liberalize finance. As a condition forIMF rescue, Korea agreed to strengthen domestic regula-tion of its financial sector in accordance with internationalbest practice standards (IMF, 1997, Para 28). Korea furtheragreed that corporate financial reports would be improvedby enforcing accounting standards in line with generallyaccepted accounting practices, and that the ‘‘financialstatements of large financial institutions’’ would hence-forth be ‘‘audited by internationally recognized firms’’(IMF, 1997, Para 28). In compliance with the terms of theIMF bailout, Korea established the Korean AccountingStandards Board in 1997 and nearly all the financialaccounting standards were rewritten for comparabilityand consistency with existing International AccountingStandards set by the IASC (Saudagaran, 2005).26

Accounting’s role in financial integration

The Financial Stability Forum’s focus of financial reformwithin emerging economies was rationalized by the argu-ment that the lack of financial transparency within EastAsian countries, rather than overly rapid financial liberal-ization, inadequate regulation at the international levelor market failure, lie at the core of the East Asian financial

25 Cumings (1998) and Wade and Veneroso (1998) argue that thisresponse was an unnecessary overreaction to the Korean crisis, whichwas a liquidity crisis, rather than a solvency crisis.

26 In 2007, Korea decided to adopt IFRS effective in 2011.

crisis (Wade, 2000). The same was true of accounting re-form. An influential study of accounting practices in EastAsia, prepared by the United Nations Conference on Tradeand Development (UNCTD) provided the rationale foraccounting reform by identifying non-transparent financialreports and lack of compliance with international financialreporting standards as a contributing cause of the crisis.The report (Rahman, 1998), argues that if East Asian banksand corporations had followed international, rather thannational, accounting standards, investors and creditorswould have had more relevant and reliable informationabout conditions that triggered the crisis. The UNCTD re-port (Rahman, 1998) further suggests that the crisis mighthave been avoided or attenuated if investors and creditorshad received early warning signals about East Asian enter-prises’ deteriorating financial conditions.

Although evidence suggests that East-Asia’s relational-based financial systems failed to conform to westernnorms of accounting transparency,27 the G-7’s decision torely on accounting reform as a remedy for financial instabil-ity is troubling in two respects. First, western enthusiasm fortransparency was inconsistent. In the case of the UnitedStates, Treasury Department officials opposed the FinancialStability Forum’s attempts to require greater transparencyfor hedge funds and offshore financial centers, even as theytouted the benefits of accounting transparency. Joseph Sti-glitz, chairman of President Clinton’s Council of EconomicAdvisors from 1995 to 1997 and Chief Economist at theWorld Bank from 1997 to 2000 writes that:

as attention focused on transparency, it became clearthat to know what was going on in emerging markets,one had to know what hedge funds and offshore bank-ing centers were doing. Indeed, there was a worry thatmore transparency elsewhere would lead to moretransactions going through these channels, and therewould overall be less information about what was goingon. Secretary Summers took the side of the hedge fundsand the offshore banking centers, resisting calls forincreased transparency, arguing that excessive trans-parency might reduce incentives for gathering informa-tion, the ‘‘price discovery’’ function in technical jargon(Stiglitz, 2002, p. 236).

Second, and more importantly, the emphasis given toaccounting and other financial reforms, begs the questionof why the West’s response to the East Asian crisis focusedexclusively on micro-prudential regulation and reformwithin emerging economies, to the exclusion of more sub-stantive changes in the international financial architectureand/or constraints on speculative capital flows. The argu-ment that a mismatch between governance arrangementsin emerging economies and the information needs of for-eign investors and creditors creates financial instability

firms had about $65 billion in payments falling due over the coming year.As . . .[IMF officials] would learn, the figure was much greater; the overseasaffiliates of Korean banks and companies owed an additional $50 billion indebts’’ which was not reflected in the official figures. Rahman (1998) alsofinds understatements of debt related to methods of accounting forderivatives, related party transactions and off-balance sheet financing.

28 See Davies and Green (2008) for a description of the global financialgovernance regime and the organizations that comprise it.

29 World Trade Organization, Singapore Ministerial Declaration adopted on13 December 1996.

30 Information economists, of course, recognized that transparency has acost subject to cost-benefit analysis. Outside the domain of esoterictechnical debates, however, accounting transparency was, as Summers’statement suggests, politically uncontroversial.

372 P.J. Arnold / Accounting, Organizations and Society 37 (2012) 361–381

can be used to justify a policy of allowing developing na-tions to establish some form of capital controls to mitigatethe severity of crises, as readily as it can be used as a jus-tification for a policy of promoting domestic accounting re-forms. The critical difference is not that transparency isbetter suited to preventing crisis, but rather that capitalcontrols impede the drive to global financial integrationwhile accounting and other financial reforms facilitate it.

As Wade (2000, p. 92) notes, the argument that non-transparency contributed to the crisis when taken to itslogical conclusion implies that countries lacking transpar-ency should proceed very slowly with liberalization andintegration into the world capital markets. It can takeyears, even decades, to build the institutional infrastruc-ture for transparent financial systems. The World Bank’sexperience in promoting domestic accounting reform inthe wake of the East Asian crisis bears this out; developingnations often lack the legal and professional infrastructureto support transparent financial reporting even long afterthey officially adopted international accounting standards(Hegarty, Gielen, & Barros, 2004). The G-7’s decision tocontinue to move forward with financial integration beforethe arduous process of implementing domestic accountingreforms was complete and without setting in place institu-tional safeguards at the international level to manage cri-ses in the interim can be explained by macro-politicaland economic factors including economic financialization,the consequent dependence of US and other western econ-omies on the global expansion of the financial sector, andthe drive to integrate East Asia and the developing worldinto the international financial markets.

Western capitalism’s deepening economic dependenceon the financial sector and the growth of internationalfinancial markets required more than the dismantling ofKeynesian-style capital controls and barriers to trade infinancial services, it also required re-regulation. New insti-tutional arrangements needed to be set in place to createthe legal and accounting infrastructure necessary to facili-tate cross border financial transactions and rationalize theopening of East Asia and other developing economies towestern finance. Global financial integration thus requirednot only the destruction of old institutions, but also thecreation of new institutions, in this case, a global financialgovernance infrastructure patterned after the Anglo-Amer-ican model.

As Zysman (1983) shows in his comparative study ofnational financial systems, capital market based financeis an essentially Anglo-American development. Histori-cally, the US and UK developed predominately capital mar-ket-led financial systems, while in Zysman’s typology(1983), France developed a predominately state-led finan-cial system and Germany a bank-led system. The rela-tional-based systems characteristic of the chaebôls inKorea and the keirestsu in Japan, likewise, provide histori-cal examples of non-capital market based financial sys-tems. While accountability mechanisms such as financialreports and audits were used across economies and timeperiods, formalized financial reporting standards set byprivate sector bodies and external audits conducted bycommercial auditing firms came to play a central role ingoverning, rationalizing and legitimating Anglo-American

financial markets from the mid-20th century on (Merino& Neimark, 1982).

From a world systems perspective, variations betweennational financial systems and their associated modes ofgovernance were products of the post-World War II, For-dist accumulation regime in which, following Keynes’maxim, trade was to be global while finance remained na-tional. During the post-war period, capital controls wereestablished and finance became nationally based to an ex-tent that it had not been in the 19th century. When na-tional financial systems were re-integrated into the worldfinancial market in the closing decades of the 20th century,the international financial markets were dominated by apowerful financial services industry, based mainly in theUS and UK, and the Anglo-American model of financialmarket governance was held up as the model for interna-tional best practice. The global financial governance re-gime developed in the 1990s was patterned largely afterthe Anglo-American model of capital market governance.Nascent international bodies, such as the InternationalOrganization of Securities Commissions (ISOCO) and theInternational Accounting Standards Committee (IASC)were fostered and supported to replicate the Anglo-Amer-ican approach to financial market regulation at the inter-national level, and accounting standards set by privatesector bodies and external audits by international account-ing firms, based predominately in the US and UK, were pro-moted as the international norm.28

Western efforts to build an international financial infra-structure patterned on the Anglo-American model andconducive to the expansion of the western financial ser-vices industry pre-date the East Asian crisis. In an effortto expand international trade in financial services, theWorld Trade Organization formally recognized IOSCO, IASCand the IFAC as the international standards setting bodesas early as 1996.29 The East Asian financial crisis providedan opportunity to further this agenda. Former US TreasurySecretary Summers (1999b, p. 12), himself, acknowledgesthat the Asian crisis gave international momentum to US ef-forts to reform the international financial architecture thathad been a ‘‘pre-occupation’’ of the Clinton administrationdating back to the G-7 summit in Naples in 1994.

Accounting reform was particularly suited to the goal ofintegrating financial markets because the call for transpar-ency was relatively non-controversial; almost everyonecould agree on the benefits of transparent accounts.30

Accounting reform could, thus, be portrayed as merely tech-nical at the same time as it facilitated the objective of creat-ing the infrastructure for the export of Anglo-American stylefinancial markets. As Secretary Summers (1999b, p. 14)writes in describing efforts to foster global financialintegration:

P.J. Arnold / Accounting, Organizations and Society 37 (2012) 361–381 373

First, activity has focused on promoting changes that canbe portrayed as technical and directly in the economicinterest of individual countries, – notably steps toincrease the transparency of domestic and internationalfinancial markets. If one were writing a history of theAmerican capital markets, I would suggest that the sin-gle most important innovation that has helped make itas successful as it is today was the idea of generallyaccepted accounting principles. La Porta et al. (1997)provide broader support for these kinds of reforms withthe finding that countries with stronger, more transpar-ent systems of investor protection have larger and dee-per domestic capital markets (emphasis added).

The East Asian crisis provided an opportunity to ad-vance longstanding US and western economic interests inpromoting financial liberalization in East Asia andthroughout the developing world. Moreover, as this quotesuggests, accounting reform was seen as instrumental tothe accomplishment of that goal.

US preference for soft law and ad hoc governance

The United States’ backing for what Wade (2007) andothers characterize as a ‘‘relatively weak’’ internationalfinancial architecture, based on financial reform withinemerging economies and market transparency, can alsobe understood in terms of the US preference for ‘‘softlaw’’ (Chiapello & Medjad, 2009) and a piecemeal approachto global governance. While other developed western na-tions shared in the economic benefits of financial liberal-ization, the United States was somewhat unique in itspreference for what Abdelal (2007) calls ‘‘ad hoc globaliza-tion ’’ as opposed to ‘‘managed globalization’’.31 The UnitedStates often favored market self-regulation, non-compulsorystandards (soft law), and private sector governance over thecreation of strong international economic institutions andbinding international agreements (hard law). This prefer-ence was not based solely on an ideological belief in the freemarkets or the difficulty of achieving multinational agree-ments; the United States also had political incentives foropposing strong forms of global governance. Given its struc-tural power in the 1990s as home to the largest capital mar-ket and as the leading world power, in the absence ofbinding international laws, the United States was well posi-tioned to impose its will, and the will of its financial sector,on other nations through unilateral policymaking or bilat-eral negotiations. Europe, on the other hand, generally pre-ferred a more managed approach to globalization andfinancial liberalization (Abdelal, 2007), one characterizedby creation of autonomous international organizations and

31 Abdelal’s thesis is convincing in some respects, but he overstates hiscase when he argues that the United States’ preference for ‘‘ad hoc’’ ratherthan ‘‘managed globalization’’ refutes claims that the US was instrumentalin managing the process of financial globalization in Wall Street’s interest.To the contrary, the an ‘‘ad hoc’’ approach arguably gave the US moreunilateral control over the course of global financial integration, while theinternational rule-based approach favored by Europe threatened toconstrain US autonomy. Moreover, the Clinton Administration was willingto use a hard law approach when it benefited US and Wall Street interestsas evidenced by US support for World Trade Organization agreementsdesigned to promote international trade in financial services.

international rules of law that would apply to all nations,including the United States.

Abdelal (2007) argues that the United States’ preferencefor ‘‘soft law’’ and a piecemeal, ‘‘ad hoc’’ approach to finan-cial globalization explains its willingness to delegateresponsibility for financial governance to private sectorbond rating agencies (Abdelal, 2007). US support for afinancial infrastructure dependent upon accounting stan-dards set by private sector bodies and surveillance by com-mercial auditing firms is consistent with the United States’preference for private sector governance over the empow-erment of autonomous international institutions. In theaftermath of the East Asian crisis, the United States notonly opposed major institutional restructuring, such asthe creation of an international financial authority to setand enforce standards,32 but also moderate reforms suchas the IMF’s proposal for an international sovereign debt res-olution mechanism to give it power to orderly unwind debtin the event of a default by a sovereign nation (Krueger,2001; Wade, 2007). According to Howard Davies, head ofthe UK’s Financial Services Authority from 1997 to 2000and chair of the Financial Stability Forum’s working groupon highly leveraged institutions, even the authority of theForum, which initially undertook initiatives to address theproblems of unregulated hedge funds and off-shore financialcenters, was ultimately reigned in by the United States (Da-vies & Green, 2008, p. 116). The US successfully opposedallowing the Financial Stability Forum to undertake inde-pendent initiatives, leaving it as little more than a clearing-house for the work of its member organizations.

The United States’ preference for a relatively weakinternational financial architecture may appear irrationalin retrospect given its position as lender of last resortand interest in global financial stability. It becomes under-standable in the context of financialization, deepening USeconomic dependency on the global expansion of thefinancial markets, and the Treasury Department’s stanchadvocacy of de-regulation and expansion of the financialservices sector. A comparatively weak international finan-cial architecture based on ‘‘soft law’’, i.e. noncompulsoryfinancial standards and codes, benefited the United Statesand the financial sector – at least in the short term. Harmo-nization of accounting and auditing standards facilitatedthe goal of integrating East Asian and other emerging econ-omies into the international financial market. And, theestablishment of a governance regime based on privatesector institutions, such as bond rating agencies, account-ing standards setters, and commercial audit firms, pro-vided the infrastructure that rationalized the expansionof western financial markets without conceding authorityto international economic organizations; as such, it leftthe United States and its politically powerful financial

32 The United Nation’s Task Force charged with studying the crisisendorsed the plan to establish minimum standards for financial regulationand supervision, but instead of relying on private sector governance, theTask Force emphasized that minimum standards should go hand in handwith stronger global regulation, including the creation a of a world financialauthority charged with setting the necessary international standards forfinancial regulation (UN, 1999).

374 P.J. Arnold / Accounting, Organizations and Society 37 (2012) 361–381

services industry largely in control of the process of globalfinancial integration.

33 It was not politically feasible for an international body, such as theFinancial Stability Forum, to designate any nation’s standards as interna-tional standards; FASB could not be officially recognized as the interna-tional standard setter any more than the SEC, rather than IOSCO, could bedesignated as the international securities regulator.

34 Interview with Lynn Turner, former Chief Accounting with the Secu-rities and Exchange Commission, June 7, 2010. Turner and SEC Chairman,Arthur Levitt, met with Whitehouse officials on two occasions to coordinatepolicy toward international accounting standards; the SEC opposed anyeffort to move to US adoption of international standards and sought toensure that the administration’s policy did not undermine them on thisissue. Nonetheless, the SEC did not object to use of international accountingstandards in emerging economies provided those standards were imple-mented and enforced.

Implications for the diffusion of internationalaccounting standards

The Financial Stability Forum’s decision to includeinternational financial reporting and international auditingstandards in its compendium of 12 key standards gaveimpetus to the diffusion of international accounting stan-dards in several ways. First, recognition by high-level G-7finance ministers and central bankers gave legitimacyand urgency to the work of hitherto obscure internationalstandards setters. Second, the International Monetary Fundand World Bank were authorized to monitor countries’progress toward implementing the Forum’s 12 standardsand codes and report on compliance via the Reports onthe Observance of Standards and Codes (ROSC) program.As part of this initiative, the World Bank established a pro-gram to assist its member countries in implementing inter-national accounting and auditing standards that continuesto this day.

Third, the Financial Stability Forum’s endorsement ofinternational accounting standards created a new ideolog-ical rationale for adoption of international accounting stan-dards. Prior to the East Asian crisis, the main rationale forharmonization was that it would reduce transaction costsby eliminating the need to reconcile financial reports pre-pared under different national standards. After the crisis,harmonization took on a new urgency as it was promotedboth as a prerequisite for financial stability and a path toeconomic development. In David Tweedie’s (2002) words,‘‘we are not just talking about arcane accounting practiceshere. We are talking about trade; we are talking aboutgrowth; we are talking about investment; we are talkingabout employment’’. The Forum’s endorsement of interna-tional accounting standards as a component of the infra-structure for a sound financial system created a newimperative for nations to implement international stan-dards in order to attract foreign investment dollars. There-after, accounting reform was touted as a path to economicdevelopment and global financial stability. With the de-mise of the communist model in the USSR and Eastern Eur-ope and the crippling of the East Asian developmentmodel, Anglo-American financial capitalism became nor-malized (Wade, 2007). Accounting reform was no longerlauded as a particular path to development, but the onlypath to economic development and integration into theworld economy.

Lastly, the Financial Stability Forum’s endorsement wasan important step in the acceptance of financial reportingstandards set by the IASB as the recognized global stan-dard. In the early 1990s, the belief that US financial report-ing rules would become the de facto global standard bydefault as multinational firms began to adopt or reconcileto US generally accepted accounting principles (GAAP) inorder to obtain listings on US stock exchanges was stillwidely held (Camfferman & Zeff, 2007; Volker, 2001). Ru-bin and Summers’ calls for accounting reform in the wakeof the East Asian crisis were, likewise, phrased in general

terms, rather than specifically advocating international asopposed to US accounting standards. When general callsfor accounting reform were operationalized, however,international financial reporting standards set by IASBand its predecessor, IASC, were designated as the globalstandard.

The US recognized that European and other nations rep-resented in the Forum would not accept US financial report-ing standards as international standards.33 If accountingreform was to be included as an element of the post-crisisinternational financial architecture, the only politically feasi-ble option was to recognize and encourage the developmentof IASC/IASB as the international standard setter. IASB Chair-man David Tweedie (2002) acknowledged this in commentson the response to the East Asian crisis, stating:

It was quite interesting to watch the American reaction,because the American reaction was that it should not beUS GAAP and the reason was that they believed thatseven Americans sitting in Connecticut subject to thepressures from Congress and the US domestic pressurescould not set standards for the rest of the world. To usea phrase from American history, ‘‘no accounting with-out representation’’.

The Financial Stability Forum’s endorsement of interna-tional financial reporting standards, did not, however, sig-nal that the US was ready to relinquish its influence andauthority over standard setting. To the contrary, the Secu-rities and Exchange Commission, which was one of threeorganizations representing the US in the Forum, viewedthe decision to promote international accounting stan-dards in the developing world as separate and distinctfrom the decision to adopt international accounting stan-dards in the US. The Whitehouse had agreed to allow theSEC to take the lead in decisions regarding use of interna-tional accounting standards at home, and the securitiesregulator opposed use of international financial reportingstandards in the United States on the grounds that USGAAP provided greater transparency for investors. TheSEC, however, had no objection to the adoption of interna-tional accounting standards by emerging economies as ameans of improving market transparency provided thosestandard were implemented and enforced.34 A single setof global accounting standards remained the goal, but itwould be pursued through a process of convergence be-tween US and international standards.

The agreement among Financial Stability Forum mem-bers to endorse international accounting standards pro-

35 The World Bank informally asked the ‘‘Big Five’’ international account-ing firms to refrain from signing financial statements that were prepared(and/or audited) using standards that were below international standards(Financial Times, October 19, 1998).

P.J. Arnold / Accounting, Organizations and Society 37 (2012) 361–381 375

vides support for Power’s (2009, p. 326) contention that‘‘the emergence of the International Accounting StandardsBoard (IASB) and its history of competition with otherstandard setting bodies is largely mis-described as a con-flict between ‘national’ and ‘international’ standards.’’ Inthe wake of the East Asian financial crisis, intra-accountingdebates over the content of national versus internationalstandards were overshadowed by the broader consensusamong Western finance ministers and central bankers onthe desirability of transparency in emerging markets, theneed to rationalize the international financial system, andthe goal of integrating East Asia and other developingeconomies into the international capital markets. Issue-based debates over the content of accounting standardswould continue and even grow in intensity, but after theEast Asian crisis debate focused on convergence betweenUS and international standards and/or control over thestandard setting process; international financial reportingstandards set by the IASB had secured a formal positionwithin the international financial governance structure.

Implications for international auditing practice

The financialization of capital created new opportuni-ties for the cartel of Anglo-American based internationalaccounting firms to achieve market concentration and con-solidate control over the accounting and auditing industryworldwide. Prior to the East Asian crisis, the major interna-tional firms’ economic interests had become closelyaligned with those of the international financial servicesindustry. By the 1990s, they were working in coalitionswith international financial firms to lobby governmentsto reduce what they perceived as national ‘‘regulatory bar-riers’’ to international trade in financial services (Arnold,2005). Non-harmonized financial reporting standards wereconsidered one such ‘‘regulatory barrier’’ to both globalfinancial integration and the large audit firms’ ambitions.

The major international auditing firms took advantageof the East Asian crisis to advance their interests in harmo-nization of financial reporting standards by establishing anew organization called the International Forum onAccountancy Development (IFAD) in 1999. The purposeof the IFAD was to bring together the expertise of the inter-national accounting industry and the political leverage ofinstitutions such as the World Bank, the IMF, IOSCO, theBasel Committee on Banking Supervision, and others inan informal partnership to advance the goal of promotingharmonization and accounting reform in the developingworld (Street & Needles, 2002). The international firms’push for accounting reform in the wake of the East Asiancrisis not only advanced their existing harmonizationagenda, but also enabled them to deflect attention fromtheir own role in the crisis. By blaming poor financialreporting standards in the developing world, the firms di-rected attention away from the role audit failures playedin the crisis in much the same way that the West’s focuson domestic reforms in emerging economies deflectedattention from their own responsibility for the crisis.

In his report prepared for the UNCTD, Rahman (1998)identified substandard auditing practices within the larg-est international auditing firms as a factor contributing to

the crisis. His study found that although local affiliates ofthe largest international accounting firms audited mostof the large corporations and banks in East Asian countries,they followed local auditing standards and practices ratherthan more rigorous international auditing standards. Inter-national auditing firms, in other words, were not ensuringthe quality of audit work performed by their internationalaffiliates:

Many East Asian corporations and banks that received aclean bill of health from their auditors proved to be ‘‘nota going concern’’ within a few months of the comple-tion of an audit. When the financial statements of a cor-poration or bank receive an unqualified audit opinionfrom an auditor belonging to one of the largest interna-tional accounting firms, the external users of thesefinancial statements tend to feel comfortable aboutthe quality of the audit and the reliability of the infor-mation. Therefore, there is an obligation on the part ofthe international accounting firms to take the necessarysteps to ensure that the quality of audit services pro-vided by their national practices all over the world doesnot fall short of practices in North America and Europe(Rahman, 1998, pp. 47–48).

By taking a leadership role in the formation of the IFAD,the international accounting firms hoped to influence thereform agenda. Tensions between the auditing firms andregulators within the SEC and the World Bank, however,soon became apparent. While the firms sought to use theIFAD as a vehicle to leverage the power of internationalorganizations to expand into major markets such as Japan,Korea, Brazil and China (Street & Needles, 2002), regulatorswere increasingly concerned about the quality of interna-tional audits.35 If auditing surveillance was to be relied uponas a global governance mechanism, regulators wanted theinternational audit firms to take responsibility for the qual-ity of the audit work done by the affiliate firms within theirinternational auditing networks. Lynn Turner, then ChiefAccountant for the SEC, openly acknowledged this conflict.In 2001, he stated:

Another organization with the potential to play animportant role in the development of a global financialinfrastructure is IFAD, the International Forum forAccountancy Development . . .. However, my skepticismabout this organization was heightened when at ameeting the leadership presented a vision for country-by-country assessments and action plans with greatfanfare and high hopes. But this plan lacked any signif-icant actions to be taken by the firms themselves toupgrade the quality of their own auditing policies, pro-cedures, and quality controls on a global basis. . .

Instead of relying exclusively on Country Action Plans,IFAD’s members could be asking themselves: ‘‘Whatcan we do today, while we work with countries, toimprove their frameworks for auditing standards?’’ The

376 P.J. Arnold / Accounting, Organizations and Society 37 (2012) 361–381

answer seems clear: IFAD, with the experience and theresources of the Big Five and other international account-ing firms, could begin now to make a significant differ-ence in the quality of international audits and ininternational financial reporting. IFAD could promptlyundertake major voluntary actions by the firms them-selves to agree on best practices, and to sign their firmnames only to audits conducted in accordance with highquality internationally acceptable standards andpractices.On February 23, 2000, I sent a letter to the leadership ofIFAC and IFAD, expressing concern about IFAD’s focuson regulatory reforms as a pre-condition to action bythe accounting profession. I urged that IFAD, and in par-ticular, the ‘‘major firm’’ members, take a leadershiprole by raising their own firms’ minimum standards.(Turner, 2001).

The IFAD disbanded in 2001 (Street & Needles, 2002),but the issue of audit quality within the internationalaccounting networks remained unresolved. Camffermanand Zeff (2007, p. 16) contend that the SEC’s refusal toeliminate its reconciliation requirement in 2000 was basedupon concerns about the quality of international auditingand supervision of international affiliates. Monitoring bythe World Bank’s ROSC program further confirmed thataudit reports signed by international firms offered littleassurance about the quality of audit work done by firms’international affiliates. Based on their experience withROSC, Hegarty et al. (2004, p. iii) conclude that:

There are inherent limitations to the extent of reliancethat can be placed on the international audit firm net-works and their individual national member firms tocompensate for weaknesses in domestic regulatoryregimes. Given the governance and managementarrangements of the networks, and the fact that the net-works themselves are not regulated (only their memberfirms are, at a national level), the main determinant ofaudit quality is the strength of the relevant domesticregulatory regimes, rather than network membership.

More recently, Davies and Green (2008, p. 224) echoedthis concern when they identified the absence of consoli-dated oversight over the global networks of audit firmsas a continuing risk to financial stability. This concernhas guided much of the subsequent history of internationalauditing standards, which revolves around ongoing at-tempts by states and international organizations to exertpolitical oversight over international auditing practice.36

Implications for financial stability

In the late 1990s, US structural power and its depen-dence on the continued growth and global expansion ofthe financial services sector effectively ruled out any macro-

36 See Humphrey et al. (2009) and Humphrey and Loft (2009) for a historyof international audit standard setting and subsequent attempts to governof international audit practice including, most recently, the creation of theInternational Forum of Independent Audit Regulators (IFIAR), an intergov-ernmental organization composed of national auditing oversight bodies,such as the US Public Companies Auditing Oversight Board (PCAOB).

economic response to the East Asian crisis that would slowthe pace of global financial integration, or cede too muchcontrol to international institutions. Even proposals formodest institutional reforms, such as giving the IMF author-ity to unwind sovereign bankruptcies (Wade, 2007), orallowing the Financial Stability Forum to take independentinitiatives to control hedge funds and offshore financialcenters were unacceptable to the United States and itsfinancial services industry and cast aside (Davies & Green,1998). Instead the G-7 nations, endorsed a relatively weak,pro-market, international financial architecture based on acompendium of standards and codes in which transpar-ency, private sector accounting standards, and surveillanceby commercial audit firms were to play a key role ingovernance of globally integrated financial markets.

This choice enabled the western financial sector to con-tinue to grow and prosper, but it did so at the expense ofensuring financial stability and social protections. Becauseof the economic disruption they caused and the systemicproblems they exposed, the financial crises of the late1990s provided a rare opportunity to forge stronger insti-tutional arrangements for governing international financialmarkets and protecting populations from the conse-quences of systemic instability. But, momentum to reignin financial speculation, to subject international financeto regulatory supervision, and to curb the power of inter-national financial industry was lost. The financial architec-ture established in wake of the East Asian crisis failed toimplement the institutional reforms needed to addressthe problems that were exposed by the series of crises thatrocked the financial world in the late 1990s. Instead, it re-lied upon the highly ideological notion that markets wouldself-regulate given sufficient financial transparency. Prob-lems ranging from unregulated hedge funds, to the bur-geoning use of financial derivatives, to offshore financialcenters, to governments’ inability to stem financial conta-gion, to moral hazard, to the growing political power andinfluence of the financial sector were left unresolved, andremain with us today.

In his retrospective on the crisis, former UK Prime Minis-ter Gordon Brown (2010, p. 78), who served as Chancellor ofthe Exchequer during the East Asian crisis, characterizes thecreation of the Financial Stability Forum as a ‘‘compromise’’and ‘‘half measure’’. The inadequacy of the G-7’s financeministers’ response to the East Asian crisis is not only appar-ent in retrospect. Early critics of the work of the FinancialStability Forum warned that the G-7’s response to the crisiswas doing too little to protect the world from future sys-temic crises. Culpeper (2000), then head of the North–SouthInstitute, for example, was prescient in warning that theWest’s response to the East Asian crisis, which he describesas long on domestic reforms to improve financial transpar-ency in emerging markets and ‘‘short on macro measuresthat can genuinely be said to address the internationalarchitecture’’, was disproportionally directed toward policychanges in the developing world. As a result of this asym-metry, he predicted that future crises were increasinglylikely to be generated ‘‘in or among the world’s richestcountries, rather than emerging markets’’.

It is well to question whether a system of governancethat relies upon market self-discipline aided by financial

P.J. Arnold / Accounting, Organizations and Society 37 (2012) 361–381 377

transparency, standardized financial reporting, and moni-toring by commercial auditing firms was ever equal tothe task of governing the rapidly expanding and crisis-prone global financial markets. Within a few years of theEast Asian crisis, Enron and other accounting scandals inthe United States cast doubts on the US Treasury Depart-ment’s enthusiasm for generally accepted accounting prin-ciples as the bedrock of stable capital markets. Moreover,as this research suggests, the private sector accountingand auditing industry was ill suited to assume a key rolein financial governance on a world scale, given the inabilityor unwillingness of audit firms to assume responsibility forthe quality of audit work performed within their interna-tional networks (Turner, 2001). Thus, the internationalfinancial architecture established by the G-7 in the wakeof the Asian financial crisis was not only weak in relationto alternative proposals for capital constraints and/orstrengthened international institutions as Wade (2007)argues, it was weak in its own right as a result of itsreliance on a loosely coordinated and weakly governedcommercial auditing industry.

Conclusions

In contrast to accounting histories that are primarily con-cerned with the workings of accountancy bodies and intra-accounting debates (Camfferman & Zeff, 2007), this studygrounds accounting history within the context of develop-ments within the global political economy and the world in-ter-state system in order to provide an economic, politicaland institutional perspective on the rise of internationalaccounting standards. In so doing, the study aims not onlyto bring economics back into institutional analysis (Arnold,2009b), but also to bring an institutional perspective topolitical economy by showing that the institutional arrange-ments set in place to govern economic activity matter.

To say that institutions matter is to argue that history isnot merely the outcome of immutable economic laws, butrather that the course of history is shaped, at least in part,by institutional forms and governance arrangements thatare brought into being by political and social struggleswhich are often sparked by financial and economic crises.In other words, it matters whether governments respondto financial crises by developing strong international anddomestic institutions capable of governing financialmarkets, constraining the financial services industry, andprotecting populations from the often devastating conse-quences of systemic instability, or rely instead on therather thin promise that markets will self-correct givensufficient transparency, harmonized accounting standards,and surveillance by commercial auditing firms.

In the case of the East Asian crisis, western nations choseto rely upon improvements in financial transparency as aremedy for financial instability instead of slowing the paceof financial market integration, constraining speculation,or making the substantive changes to the internationalfinancial architecture needed to protect societies from fu-ture crises. That choice was, at least in part, strategic. As thisstudy shows, US Treasury Department officials sawaccounting reform as a component of their efforts to further

global financial integration and the spread of western capi-tal markets to emerging economies in East Asia and thedeveloping world. Accounting harmonization, thus, playeda constitutive role in the financialization of the world econ-omy and US-led efforts to shape the world economy in theimage of Anglo-American, finance-led capitalism.

This study has several limitations that need to be ad-dressed by further research. The paper describes a ‘‘su-pra-politics’’ that does not address the ways in whichinstitutional norms, capabilities, and organizational unitsdeveloped prior to the crisis placed boundaries aroundthe range of possible of responses to the East Asian finan-cial crisis. Further research is needed to understand the ex-tent to which institutional pre-conditions enabled andconstrained the macro economic and political processesdescribed in this paper.

Additional research is also needed to examine whetherand how conflicts within and between nation states, inter-national accounting firms, and international economicinstitutions influenced construction of the internationalfinancial architecture. While this study discusses the roleinternational accounting firms played in the creation ofthe IFAD, it does not examine international accountingindustry’s harmonization strategies and lobbying activitiesin depth. Nor, does the study provide insights into internaldebates and divisions, if any, among Financial Stability For-um members over the inclusion of accounting and auditingstandards in the international financial architecture. Lastly,the paper does not examine the response within East Asiaand the developing world to the West’s harmonizationagenda. Further research is needed to understand theforms and extent of local resistance to and/or collaborationwith the financial harmonization agenda.

While this macro-level analysis of the East Asian finan-cial crisis provides only a partial history of the rise of inter-national accounting standards, it highlights aspects of thathistory that might otherwise be ignored. Would interna-tional accounting standards have risen to prominence wereit not for the crisis of over-accumulation in the 1970s andthe desire to open channels for profit making in the financesector, the ascendance of financial capital in the 1980s and1990s, US geo-political influence in the 1990s as the orga-nizing center of world capitalism, and US support forexpansion of globally integrated financial markets andaccounting reform in emerging economies? This study ar-gues that these macro-economic and political factors playa part in the history of the rise of international accountingstandards and that the study of political economy can dee-pen our understanding of the dynamics of institutionalchange in the accounting field.

The lessons of the East Asian crisis remain relevant to-day. In 2008, a decade after the East Asian crisis, the inter-national financial system faced a crisis of even greaterproportions, this time originating in the US subprimemortgage market. Although Arrighi (2007) and othersargue that US hegemony over the world system is now indecline and the rise of China as an economic power hastransformed East–West relations, much else remains thesame. In the aftermath of the 2008 financial crisis, we areonce again presented with an array of thoughtful proposalsfor substantive reform of the financial system reminiscent

378 P.J. Arnold / Accounting, Organizations and Society 37 (2012) 361–381

of earlier proposals, including calls for financial transactiontaxes, stronger international and domestic regulation, andcurbs on the size and power of financial firms. The G-20has met and created a new Financial Stability Board (FSB)to replace the Financial Stability Forum. The Financial Sta-bility Board and G-20 have once again endorsed the princi-ples of financial transparency and accounting convergence.

Meanwhile, in the decade since the East Asian crisis, thefinancial service industry has grown even more politicalpowerful37 while the economies of the United States andother western nations remain dependent upon, if not hos-tage to, the financial sector. In the United States, the politicalinfluence and economic importance of the financial sectorhas weakened domestic financial reforms and meaningfulreforms at the international level are once again proving dif-ficult to implement. Anglo-American style financial capital-ism, although discredited by the 2008 crisis, will no doubtsurvive in the intermediate term and continue to exerciseeconomic and political influence within the world inter-state system. As a result, accounting standards and surveil-lance by commercial audit firms will, in all likelihood, con-tinue to occupy a pivotal place in the governance of globalcapital markets and the regulation of international banking,thus, providing a fertile field for future research.

Historical research can not only enhance our under-standing of the forces driving international accounting har-monization, but also help us develop a more criticalanalysis of the role accounting plays in the institutionalarrangements governing financial markets. This requiresquestioning the adequacy of transparency as a governancemechanism and identifying its limits. The notion thatfinancial reporting and auditing reduce information asym-metry and thereby enable self-regulating financial marketsto operate efficiently is a normative theory that neither de-scribes the world nor explains the historical origins ofaccounting practices and institutions. If left unchallengedby accounting scholars, the belief will persist that ‘‘gettingthe accounting ‘right’’’ (Young, 1995) will somehow ensurefinancial stability even in the presence of institutionallyweak international and domestic financial regulatorystructures and a highly financialized and crisis-proneworld economy. Arguably, the illusion that financial trans-parency aided by harmonized financial reporting standardsand auditing surveillance can substitute for stronger formsof oversight and constraints on financial speculation con-tributes to financial instability by providing ideologicalsupport for dangerous levels of financial speculation andminimal regulation. This was true in the aftermath of theEast Asian crisis in the late 1990s and remains so today.

Acknowledgements

I wish to thank David Cooper, Leslie Oakes and twoanonymous reviewers for their helpful comments and sug-gestions. Any remaining errors or omissions are my own.

37 Weissman and Donahue (2009) document that in the decade 1998–2008, the financial sector in the US spent $1.7 billion on campaigncontributions, and $3.4 billion for lobbying expenditures. Of that total,accounting firms spend $81.5 million on campaign contributions and$121.7 million for lobbying expenditures.

Appendix A. Chronology of events

July 1997

East Asian financial crisis begins inThailand; contagion spreads toMalaysia, the Philippines andSingapore

August 1997

Crisis spreads to Indonesia October 1997 Hong Kong stock market plunges. The

Dow Jones Industrial Average recordsits biggest point loss to date; tradingon the US stock markets is suspended

November1997

Crisis spreads to Korea

August 1998

Russia defaults on its debt; the DowJones Industrial average plummetsmarking the second-worst point lossin the Dow’s history

September1998

Crisis spreads to Latin America

Collapse of the US hedge fund, LongTerm Capital Management; stockmarkets in the US and Europe plungeon fears that bank losses on LTCMcould put the entire banking system atrisk

October 1998

Meeting on October 3, G-7 financeministers and central bank governorsask Hans Tietmeyer to recommendnew structures and arrangementneeded to facilitate cooperation andcoordination among partiesresponsible for international financialstability G-7 finance ministers and centralbank governors issue a Declaration onOctober 30 agreeing to strengthen theinternational financial system byincreasing transparency and opennessof the international financial system,and identifying and disseminatinginternational principles, standards andcodes of best practice At the same time, they call upon IASCto finalize by early 1999 a proposal fora full range of internationally agreedaccounting standards. IOSCO, IAIS andthe Basel Committee are directed tocomplete a timely review of thesestandards

February 1999

Meeting in Bonn, G-7 FinanceMinisters and Central Bank Governorsendorse Tietmeyer’s recommendationfor the creation of the FinancialStability Forum to promoteinformation exchange andcoordination among nationalauthorities, international institutions,and international regulatory expertswith responsibilities for internationalfinancial stability

P.J. Arnold / Accounting, Organizations and Society 37 (2012) 361–381 379

April 1999 F

inancial Stability Forum’s firstmeeting in Washington, DC. The initialmembership includes the financeministries, central banks and leadingregulators of each of the G-7 countries,together with the chairs of theinternational regulatoryorganizations, and representative ofthe international financial institutions A t its first meeting, the Forum sets upthree Working Groups on (1) highlyleveraged institutions, (2) capitalflows, and (3) offshore financialcenters. It also agrees to create acompendium of standards listinginternationally accepted standardsrelevant to a sound financial system A t the urging of G-7 heads of state, theForum’s membership is broadened byinclusion of representatives fromHong Kong, Singapore, Australia andthe Netherlands in advance of thesecond meeting

September1999

Fm

inancial Stability Forum’s secondeeting in Paris. By this time the

Forum has compiled a draftcompendium of standards, whichwould be reviewed and updated on anongoing basis

S ubsequently a compendiumconsisting of 43 economic andfinancial standards is posted to theForum’s website. Over the course ofthe following year, FSF membersrecommend additional standards(including accounting and auditing)bringing the total of proposedstandards to 64 L ater in September, G-7 FinanceMinister and Bank Governors establishthe G-20 to serve as a forum forcooperation and consultation onmatters pertaining to the internationalfinancial system

March 2000 F

inancial Stability Forum’s thirdmeeting in Singapore. The Forumagrees to focus attention on 12 keyinternational standards. Accountingstandards set by IASC and auditingstandards set by the IFAC are amongthe 12 key financial standards

April 2001 T

he IASB is founded to replace IASC

References

Abdelal, R. (2007). Capital rules: The construction of global finance.Cambridge, MA and London: Harvard University Press.

Aglietta, M. (1976). A theory of capitalist regulation: The US experience.London and New York: New Left Books.

Armijo, L. E. (2001). The political geography of world financial reform:Who wants what and why? Global Governance, 7(4), 379–396.

Arnold, P. J. (2005). Disciplining domestic regulation: The World TradeOrganization and the market for professional services. Accounting,Organizations and Society, 30(4), 299–330.

Arnold, P. J. (2009a). Global financial crisis: The challenge to accountingresearch. Accounting, Organizations and Society, 34(6–7), 803–809.

Arnold, P. J. (2009b). Institutional perspectives on the internationalizationof accounting. In C. S. Chapman, D. J. Cooper, & P. B. Miller (Eds.),Accounting, organizations and institutions: Essays in honour of AnthonyHopwood (pp. 48–64). Oxford and New York: Oxford University Press.

Arrighi, G. (1994). The long twentieth century: Money, power and the originsof our times. London and New York: Verso.

Arrighi, G. (2003). The social and political economy of global turbulence.New Left Review, 20(March-April), 5–71.

Arrighi, G. (2005). Hegemony unraveling II. New Left Review, 33(May–June), 83–116.

Arrighi, G. (2007). Adam Smith in Beijing: Lineages of the twenty-firstcentury. London and New York: Verso.

Bhagwati, J. (1998). The capital myth. Foreign Affairs, 77(3), 7–12.Bhimani, A. (2008). The role of crisis in reshaping the role of accounting.

Journal of Accounting and Public Policy, 27(6), 444–454.Blustein, P. (2001). The chastening. New York: Public Affairs.Botzem, S. (2008). Transnational expert-driven standardisation:

Accountancy governance from a professional point of view. In J. C.Graz & A. Nölke (Eds.), Transnational private governance and its limits(pp. 44–57). London: Rutledge.

Botzem, S., & Quack, S. (2009). (N)o limits to Anglo-American accounting?Reconstructing the history of the International Accounting StandardsCommittee: A review article. Accounting, Organizations and Society,34(8), 988–998.

Boyer, R. (1990). The regulation school: A critical introduction. New York:Columbia University Press.

Boyer, R. (2007). Assessing the impact of fair value upon financial crisis.Socio-Economic Review, 5(4), 779–807.

Brenner, R. (2002). The boom and the bubble: The US in the world economy.London and New York: Verso.

Brown, G. (2010). Beyond the crash: Overcoming the first crisis ofglobalization. New York: The Free Press.

Camfferman, K., & Zeff, S. (2007). Financial reporting and global capitalmarkets: A history of the International Accounting Standards Committee1973–2000. Oxford: Oxford University Press.

Chau, W. F., & Taylor, S. L. (2008). The rise and rise of IFRS: Anexamination of IFRS diffusion. Journal of Accounting and Public Policy,27, 462–473.

Chiapello, E., & Medjad, K. (2009). An unprecedented privatisation ofmandatory standards setting: The case of European accounting policy.Critical Perspectives on Accounting, 20(4), 448–468.

Crotty, J., & Epstein, G. (1999). A defense of capital controls in light of theAsian financial crisis. Journal of Economic Issues, 33(2), 427–433.

Culpeper, R. (2000) Systemic reform at a standstill: A flock of ‘‘Gs’’ insearch of global financial stability. In Paper presented at the conference‘‘Critical issues in financial reform: Latin-American/Caribbean andCanadian perspectives’’, Munk Centre for International Studies,University of Toronto, June 1–2. <http://www.g8.utoronto.ca/scholar/Culpeper2000/index.html> Accessed 12.01.10. Subsequentlypublished In A. Berry, G. Indart (Eds.) (2003). Critical issues ininternational financial reform (pp. 203–236). New Brunswick, USAand London: Transaction Publishers.

Cumings, B. (1998). The Korean crisis and the end of ‘late’ development.New Left Review, I(231), 43–72.

Davies, H., & Green, D. (2008). Global financial regulation: The essentialguide. Cambridge: Polity Press.

Duménil, G., & Lévy, D. (2005). Costs and benefits of neoliberalism: A classanalysis. In G. A. Epstein (Ed.), Financialization and the world economy(pp. 17–45). Cheltenham, UK and Northampton, MA: Edward Elgar.

Eaton, S. B. (2005). Crisis and the consolidation of internationalaccounting standards: Enron, IASB and America. Business andPolitics, 7(3) (article 4).

Eatwell, J., & Taylor, L. (2000). Global finance at risk. New York: The NewPress.

Epstein, G. A. (2005). Introduction. In G. A. Epstein (Ed.), Financialization ofthe world economy (pp. 3–16). Cheltenham, UK and Northampton,MA: Edward Elgar.

Financial Times (1998). Big Five criticized over global audit standards:World Bank action may speed up international code. By Jim Kelly,London edition, October 19, p. 1.

Foster, J. B., & Magdoff, F. (2009). The great financial crisis: Causes andconsequences. New York: Monthly Review Press.

380 P.J. Arnold / Accounting, Organizations and Society 37 (2012) 361–381

Friedman, T. L. (2000). The Lexis and the Olive Tree. New York: AnchorBooks.

Greenspan, A. (1999). Do efficient financial markets mitigate financialcrisis? In Remarks before the 1999 financial markets conference of theFederal Reserve Bank of Atlanta, Sea Island, Georgia, October 19.

Harvey, D. (2005). A brief history of neoliberalism. New York: OxfordUniversity Press.

Harvey, D. (2010). The enigma of capital. New York: Oxford UniversityPress.

Hegarty, J., Gielen, F., & Barros, A. C. H. (2004). Implementation ofinternational accounting and auditing standards: Lessons learnedfrom the World Bank’s accounting and auditing ROSC program,September. <http://www.worldbank.org/ifa/LessonsLearned_ROSC_AA.pdf> Accessed 20.03.10.

Helleiner, E. (1994). States and the reemergence of global finance: FromBretton Woods to the 1990s. Ithaca: Cornell University Press.

Humphrey, C., & Loft, A. (2009). Governing audit globally: IFAC, the newinternational financial architecture and the auditing profession. In C.S. Chapman, D. J. Cooper, & P. B. Miller (Eds.), Accounting, organizationsand institutions: Essays in honour of Anthony Hopwood (pp. 47–64, 205–232). Oxford and New York: Oxford University Press.

Humphrey, C., Loft, A., & Woods, M. (2009). The global audit professionand the international financial architecture: Understandingregulatory relationships at a time of crisis. Accounting, Organizationsand Society, 34(6–7), 810–825.

Hutton, W. (1996). The state we’re in: Why Britain is in crisis and how toovercome it. London: Vintage.

International Monetary Fund (1997). Letter of intent of the government ofKorea and memorandum on the economic program. December 3,1997.

Kapstein, E. B. (1994). Governing the global economy: International financeand the state. Cambridge, MA and London: Harvard University Press.

King, M. (1999). Reforming the international financial system: The middleway. Speech delivered to a session of the money marketeers at theFederal Reserve Bank of New York, September 9. An earlier version ofthis speech, entitled ‘‘International capital flows: Opportunities andchallenges’’, was presented on June 2, 1999 to the commonwealthsymposium on liberalisation of financial services.

Krippner, G. (2004). What is financialization? Unpublished paper,Department of Sociology, UCLA.

Krueger, A. (2001). International financial architecture for 2002. A newapproach to sovereign debt restructuring. Address given at theNational Economists’ Club annual members’ dinner, November 26,American Enterprise Institute, Washington, DC. <www.imf.org/external/np/speeches/2001/112601.htm> Accessed 10.03.10.

Krugman, P. (1998). Saving Asia: It’s time to get radical. Fortune, 38(5),74–80.

La Porta, R., Lopez-de-Silane, F., Schleifer, A., & Vishny, R. (1997). Legaldeterminants of external finance. NBER working paper no. W5879.January. Subsequently published in the Journal of Finance, 52(3),1131–1150.

Lipscy, P. Y. (2003). Japan’s Asian Monetary Fund proposal. StanfordJournal of East Asian Affairs, 3(1), 93–104.

Loft, A., & Humphrey, C. (2006). In pursuit of global regulation: Changinggovernance and accountability structure at the InternationalFederation of Accountants (IFAC). Accounting, Auditing andAccountability Journal, 19(3), 428–451.

Martinez-Diaz, L. (2005). Strategic experts and improvising regulators:Explaining the IASC’s rise to global influence, 1973–2001. Business andPolitics, 7(3) (article 3).

Mattli, W., & Büthe, T. (2003). Setting international standards: Techno-logical rationality or primacy of power. World Politics, 56(1), 1–42.

Mattli, W., & Büthe, T. (2005). Accountability in accounting? The politics ofprivate rule-making in the public interest. Governance: An InternationalJournal of Policy, Administration and Institutions, 18(3), 399–429.

Merino, B. D., & Neimark, M. D. (1982). Disclosure regulation and publicpolicy: A sociohistorical reappraisal. Journal of Accounting and PublicPolicy, 1(1), 33–57.

Meyers, J. W., Boli, J., Thomas, G. M., & Ramirez, F. O. (1997). World societyand the nation state. American Journal of Sociology, 103(1), 144–181.

Nobes, C., & Parker, R. (1988). Comparative international accounting. NewYork: St. Martins Press.

Nölke, A., & Perry, J. (2007). The power of transnational privategovernance: Financialization and the IASB.

Perry, J., & Nölke, A. (2005). International accounting standard setting: Anetwork approach. Business and Politics (7), 3 (article 5).

Perry, J., & Nölke, A. (2006). The political economy of internationalaccounting standards. Review of International Political Economy, 13(4),559–586.

Polanyi, K. (1944). The great transformation: The political and economicorigins of our times. Boston, MA: Beacon Press.

Pollin, R., Baker, D., & Schaberg, M. (2001). Securities transactions taxesfor US financial markets. Political Economy Research Institute,University of Massachusetts Amherst. Working paper no. 20.Available at SSRN: <http://ssrn.com/abstract=333744> Accessed10.03.10.

Porter, T. (2005). Private authority, technical authority, and the globali-zation of accounting standards. Business and Politics, 7(3) (article 2).

Posner, E. (2009). Making rules for global finance: Transatlanticregulatory cooperation at the turn of the millennium. InternationalOrganization, 63, 665–699.

Power, M. (2009). Financial accounting without a state. In C. S. Chapman,D. J. Cooper, & P. B. Miller (Eds.), Accounting, organizations andinstitutions: Essays in honour of Anthony Hopwood (pp. 324–340).Oxford and New York: Oxford University Press.

Rahman, M. Z. (1998). The role of accounting in the East Asian financialcrisis: Lessons learned? Transnational Corporations, 7(3), 1–52.

Rogoff, K. (1999). International institutions for reducing global financialinstability. Journal of Economic Perspectives, 13(4), 21–43.

Rubin, R. (1998). Strengthening the architecture of the internationalfinancial system. Brookings Institute speech, April 14. <http://www.ustreas.gov/press/releases/rr2366.htm> Accessed 05.05.10.

Saudagaran, S. M. (2005). Asian accounting handbook. ThompsonPublishing.

Schor, J. B. (1992). Introduction. In T. Banuri & J. B. Schor (Eds.), Financialopenness and national autonomy (pp. 1–14). Oxford: Oxford UniversityPress.

Simons, B. A. (2001). The international politics of harmonization: The caseof capital market regulation. International Organization, 55(3), 589–620.

Soederberg, S. (2001). The emperor’s new suit: The new internationalfinancial architecture as a reinvention of the Washington Consensus.Global Governance, 7, 453–467.

Soros, G. (1998). The crisis of global capitalism. New York: Public AffairsPress.

Stiglitz, J. E. (2002). Globalization and its discontents. NY and London: W.W.Norton & Company.

Street, D. L. (2002). An interview with Sir David Tweedie. Journal ofInternational Financial Management and Accounting, 13(1), 73–100.

Street, D. L., & Needles, B. E. Jr., (2002). An interview with Brian Smith ofthe International Forum on Accountancy Development (IFAD). Journalof International Financial Management and Accounting, 13(3), 254–273.

Summers, L. H. (1999a). Roots of the Asian crisis and the road to astronger global financial system. Remarks by Lawrence H. Summers,Deputy Secretary of the Treasury to the International Institute ofFinance, 25 April. <www.treas.gov/press/releases/rr3102.htm>Accessed 22.01.09.

Summers, L. H. (1999b). Distinguished lecture on economics ingovernment. The Journal of Economic Perspectives, 13(2), 3–18.

Tietmeyer, H. (1999). International cooperation and coordination in thearea of financial market supervision and surveillance. Report to the G-7 finance ministers and central bank governors, February 11.<www.financialstabilityboard.org/publications/r_9902.pdf> Accessed19.08.09.

Turner, L. E. (2001). The accounting profession’s obligation to globalinvestors: Quality investor information through quality audits.Speech by Lynn E. Turner, Chief Accountant, US Securities andExchange Commission to the third European FASB-SEC financialreporting conference, Frankfurt, Germany, April 6.

Tweedie, D. (2002). Speech by Sir David Tweedie, Chairman, InternationalAccounting Standards Board at a dinner hosted by the FinancialReporting Council, the Business Council of Australia, the AustralianInstitute of Company Directors, and the Australian Stock Exchange, 15August. <http://www.frc.gov.au/speeches/tweedie_speech.asp>Accessed 09.01.10.

Tweedie, D. (2008). The possibility of a global standard. Address to theEmpire Club of Canada, 25 April. <http://www.iasb.org/News/Announcements+and+Speeches/Sir+David+Tweedie+addresses+the+Empire+Club+of+Canada.htm>Accessed 14.01.10

United Nations (1999). Towards a new international financialarchitecture: Report of the task force of the Executive Committeeon Economic and Social Affairs of the United Nations, 21 January.

Volker, P. (2001). Statement of Paul A. Volcker before the Capital Markets,Insurance and Government Sponsored Enterprises Subcommittee ofthe US House of Representatives, Washington, DC, 7 June.

Wade, R., & Veneroso, F. (1998). The Asian crisis: The high debt model vs.the Wall Street-Treasury-IMF complex. The New Left Review, I(228),3–23.

P.J. Arnold / Accounting, Organizations and Society 37 (2012) 361–381 381

Wade, R. (2000). Wheels within wheels: Rethinking the Asian crisis andthe Asian model. Annual Review of Political Science, 3, 85–115.

Wade, R. (2007). A new global financial architecture? New Left Review,46(July–August), 113–129.

Wallerstein, I. M. (2004). World-systems analysis: An introduction. Durham,NC: Duke University Press.

Weissman, R., & Donahue, J. (2009). Sold out: How Wall Street andWashington betrayed America. Essential Information and the

Consumer Education Foundation. <http://www.wallstreetwatch.org/reports/sold_out.pdf> Accessed 31.12.10.

Young, J. J. (1995). Getting the accounting ‘‘right: Accounting and thesavings and loan crisis. Accounting, Organizations and Society, 20(1),55–80.

Zysman, J. (1983). Government, markets, and growth: Financial systems andthe politics of industrial change. Ithaca, NY: Cornell University Press.