Debating the ‘Evolution of Accounting Equation’: A Cross-Case Analysis Approach

Tibuhinda Ngonzi

doi:doi:10.11648/j.jfa.20160404.13

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Debating the ‘Evolution of Accounting Equation’: A Cross-Case Analysis Approach

Tibuhinda Ngonzi

Published in Journal of Finance and Accounting (Volume 4, Issue 4)

Received: 20 May 2016 Accepted: 30 May 2016 Published: 13 June 2016

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Abstract

This paper is an interrogation of the applicability of the recently introduced ‘new form of accounting equation’ and a ‘dynamic approach to accounting for capital structure’ (JFA 2013: 1(44) 55-63). It explicates the issues related to the methodological foundations at the base of the model specification and the estimated parameters. It goes on to conduct a cross-case analysis methodological approach to the same set of empirical data as a triangulation process. The outcomes confirm that the provided empirical evidence is not sufficient to demonstrate the pegging of the rate of change of equity and liabilities with respect to the change of assets to 36% and 64% values respectively. Rather this paper’s findings indicate that in the long term companies have used retained earnings and reserves to expel debt as a strategy to keep their debt levels low, except for firms with accumulated losses or excessive deficit. This paper also finds that firms have maintained certain debt levels but not maintained the logic suggested by the pay-off theory, and that the perking order was demonstrated through long-term adjustment process. This paper concludes that the new form of accounting equation is not pragmatically viable. The paper proceeds to make a contribution by developing a predictive dynamic model for capital structure based on lagged variables.

Published in	Journal of Finance and Accounting (Volume 4, Issue 4)
DOI	10.11648/j.jfa.20160404.13
Page(s)	179-187
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2016. Published by Science Publishing Group

Keywords

Accounting Equation, Cross-Case Analysis, Dynamic Model, Lagged Variables

References

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APA Style

Tibuhinda Ngonzi. (2016). Debating the ‘Evolution of Accounting Equation’: A Cross-Case Analysis Approach. Journal of Finance and Accounting, 4(4), 179-187. https://doi.org/10.11648/j.jfa.20160404.13

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ACS Style

Tibuhinda Ngonzi. Debating the ‘Evolution of Accounting Equation’: A Cross-Case Analysis Approach. J. Finance Account. 2016, 4(4), 179-187. doi: 10.11648/j.jfa.20160404.13

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AMA Style

Tibuhinda Ngonzi. Debating the ‘Evolution of Accounting Equation’: A Cross-Case Analysis Approach. J Finance Account. 2016;4(4):179-187. doi: 10.11648/j.jfa.20160404.13

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@article{10.11648/j.jfa.20160404.13,
  author = {Tibuhinda Ngonzi},
  title = {Debating the ‘Evolution of Accounting Equation’: A Cross-Case Analysis Approach},
  journal = {Journal of Finance and Accounting},
  volume = {4},
  number = {4},
  pages = {179-187},
  doi = {10.11648/j.jfa.20160404.13},
  url = {https://doi.org/10.11648/j.jfa.20160404.13},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.jfa.20160404.13},
  abstract = {This paper is an interrogation of the applicability of the recently introduced ‘new form of accounting equation’ and a ‘dynamic approach to accounting for capital structure’ (JFA 2013: 1(44) 55-63). It explicates the issues related to the methodological foundations at the base of the model specification and the estimated parameters. It goes on to conduct a cross-case analysis methodological approach to the same set of empirical data as a triangulation process. The outcomes confirm that the provided empirical evidence is not sufficient to demonstrate the pegging of the rate of change of equity and liabilities with respect to the change of assets to 36% and 64% values respectively. Rather this paper’s findings indicate that in the long term companies have used retained earnings and reserves to expel debt as a strategy to keep their debt levels low, except for firms with accumulated losses or excessive deficit. This paper also finds that firms have maintained certain debt levels but not maintained the logic suggested by the pay-off theory, and that the perking order was demonstrated through long-term adjustment process. This paper concludes that the new form of accounting equation is not pragmatically viable. The paper proceeds to make a contribution by developing a predictive dynamic model for capital structure based on lagged variables.},
 year = {2016}
}

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TY  - JOUR
T1  - Debating the ‘Evolution of Accounting Equation’: A Cross-Case Analysis Approach
AU  - Tibuhinda Ngonzi
Y1  - 2016/06/13
PY  - 2016
N1  - https://doi.org/10.11648/j.jfa.20160404.13
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PB  - Science Publishing Group
SN  - 2330-7323
UR  - https://doi.org/10.11648/j.jfa.20160404.13
AB  - This paper is an interrogation of the applicability of the recently introduced ‘new form of accounting equation’ and a ‘dynamic approach to accounting for capital structure’ (JFA 2013: 1(44) 55-63). It explicates the issues related to the methodological foundations at the base of the model specification and the estimated parameters. It goes on to conduct a cross-case analysis methodological approach to the same set of empirical data as a triangulation process. The outcomes confirm that the provided empirical evidence is not sufficient to demonstrate the pegging of the rate of change of equity and liabilities with respect to the change of assets to 36% and 64% values respectively. Rather this paper’s findings indicate that in the long term companies have used retained earnings and reserves to expel debt as a strategy to keep their debt levels low, except for firms with accumulated losses or excessive deficit. This paper also finds that firms have maintained certain debt levels but not maintained the logic suggested by the pay-off theory, and that the perking order was demonstrated through long-term adjustment process. This paper concludes that the new form of accounting equation is not pragmatically viable. The paper proceeds to make a contribution by developing a predictive dynamic model for capital structure based on lagged variables.
VL  - 4
IS  - 4
ER  -

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Author Information

Tibuhinda Ngonzi

Department of Accountancy & Finance, St. Augustine University of Tanzania, Mwanza, Tanzania

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APA Style

Tibuhinda Ngonzi. (2016). Debating the ‘Evolution of Accounting Equation’: A Cross-Case Analysis Approach. Journal of Finance and Accounting, 4(4), 179-187. https://doi.org/10.11648/j.jfa.20160404.13

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ACS Style

Tibuhinda Ngonzi. Debating the ‘Evolution of Accounting Equation’: A Cross-Case Analysis Approach. J. Finance Account. 2016, 4(4), 179-187. doi: 10.11648/j.jfa.20160404.13

Copy | Download

AMA Style

Tibuhinda Ngonzi. Debating the ‘Evolution of Accounting Equation’: A Cross-Case Analysis Approach. J Finance Account. 2016;4(4):179-187. doi: 10.11648/j.jfa.20160404.13

Copy | Download

@article{10.11648/j.jfa.20160404.13,
  author = {Tibuhinda Ngonzi},
  title = {Debating the ‘Evolution of Accounting Equation’: A Cross-Case Analysis Approach},
  journal = {Journal of Finance and Accounting},
  volume = {4},
  number = {4},
  pages = {179-187},
  doi = {10.11648/j.jfa.20160404.13},
  url = {https://doi.org/10.11648/j.jfa.20160404.13},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.jfa.20160404.13},
  abstract = {This paper is an interrogation of the applicability of the recently introduced ‘new form of accounting equation’ and a ‘dynamic approach to accounting for capital structure’ (JFA 2013: 1(44) 55-63). It explicates the issues related to the methodological foundations at the base of the model specification and the estimated parameters. It goes on to conduct a cross-case analysis methodological approach to the same set of empirical data as a triangulation process. The outcomes confirm that the provided empirical evidence is not sufficient to demonstrate the pegging of the rate of change of equity and liabilities with respect to the change of assets to 36% and 64% values respectively. Rather this paper’s findings indicate that in the long term companies have used retained earnings and reserves to expel debt as a strategy to keep their debt levels low, except for firms with accumulated losses or excessive deficit. This paper also finds that firms have maintained certain debt levels but not maintained the logic suggested by the pay-off theory, and that the perking order was demonstrated through long-term adjustment process. This paper concludes that the new form of accounting equation is not pragmatically viable. The paper proceeds to make a contribution by developing a predictive dynamic model for capital structure based on lagged variables.},
 year = {2016}
}

Copy | Download

TY  - JOUR
T1  - Debating the ‘Evolution of Accounting Equation’: A Cross-Case Analysis Approach
AU  - Tibuhinda Ngonzi
Y1  - 2016/06/13
PY  - 2016
N1  - https://doi.org/10.11648/j.jfa.20160404.13
DO  - 10.11648/j.jfa.20160404.13
T2  - Journal of Finance and Accounting
JF  - Journal of Finance and Accounting
JO  - Journal of Finance and Accounting
SP  - 179
EP  - 187
PB  - Science Publishing Group
SN  - 2330-7323
UR  - https://doi.org/10.11648/j.jfa.20160404.13
AB  - This paper is an interrogation of the applicability of the recently introduced ‘new form of accounting equation’ and a ‘dynamic approach to accounting for capital structure’ (JFA 2013: 1(44) 55-63). It explicates the issues related to the methodological foundations at the base of the model specification and the estimated parameters. It goes on to conduct a cross-case analysis methodological approach to the same set of empirical data as a triangulation process. The outcomes confirm that the provided empirical evidence is not sufficient to demonstrate the pegging of the rate of change of equity and liabilities with respect to the change of assets to 36% and 64% values respectively. Rather this paper’s findings indicate that in the long term companies have used retained earnings and reserves to expel debt as a strategy to keep their debt levels low, except for firms with accumulated losses or excessive deficit. This paper also finds that firms have maintained certain debt levels but not maintained the logic suggested by the pay-off theory, and that the perking order was demonstrated through long-term adjustment process. This paper concludes that the new form of accounting equation is not pragmatically viable. The paper proceeds to make a contribution by developing a predictive dynamic model for capital structure based on lagged variables.
VL  - 4
IS  - 4
ER  -

Copy | Download