Decoupled earnings: An institutional perspective of the consequences of maximizing shareholder value

An analysis of the deinstitutionalization of inflation-adjusted accounting practices in Brazilian companies

“…It is within this pillar that the standards for accounting, reporting and disclosure requirements are formulated, the tax rules are codified and the supervisory functions are established. This process of accounting regulation results in the coercive isomorphism of annual financial reports and tax returns, which offers a comparative and standardized basis that produces a perpetuation of accounts, representing a measure of legitimacy (Kury, 2007).…”

“…In this context, in his research, Kury (2007) observed that when organizational performance (profit) does not meet the standard of legitimacy, there is a gap between the structure and the activity. In this case, the accounts are decoupled from the results by profit managing.…”

“…In addition, actions related to professional education and certifications are undertaken. This process results in the normative isomorphism of accounts, where the accounts are aligned with the professional expectations of the normative institutional actors (Kury, 2007).…”

“…The formal organizational structure, with its highly rationalized appearance, is dissociated (or decoupled) from real organizational practice. Kury (2007) noted that the behavior of managers can be motivated not only by conflicts of interest (agency-based motivations of self-interest) but also from the pressure for legitimacy, such as regulatory, normative and culturalcognitive pressures. Given the central logic that the maintenance of restatement practices applied to accounting figures during a particular period can produce a situational reality of "maximizing shareholder value" that is different than that expected by the "capital market," analyzing the pressures that occur within the institutional field provides an interesting context for exploring the use of this practice as a decoupled behavior.…”

“…In this pillar, the actors interpret rules, validate compliance and evaluate performance. Kury (2007) noted that there are two forms of legitimacy within the normative pillar: the accuracy of the accounts and the performance quality. Richardson (1987) added that the accounting profession serves as a legitimizing institution and validates the accuracy of accounts and financial reports through the audit.…”