The determinants and consequences of big 4 lobbying positions on proposed accounting standards

Despite the considerable participation of Big 4 accounting firms in accounting standard setting, no studies provide systematic evidence on what factors shape Big 4 lobbying positions or whether their positions materially influence standards. Using textual analysis of comment letters to measure lobbying positions on FASB exposure drafts, I seek to provide such evidence. I find that Big 4 lobbying positions reflect incentives to increase fee-generating work and maintain client relationships, and that Big 4 support for fee-increasing proposals is constrained by client opposition. Big 4 lobbying positions are significantly associated with standard setting outcomes, both in isolation as well as relative to other FASB constituents, including financial statement preparers and users. My results indicate financial statement users are neither directly (via comment letter lobbying) nor indirectly (via Big 4 advocacy) influential in the comment letter phase of FASB due process.