Volume 12, Issue 1

This paper combines the market process approach developed by the Austrian School of Economics with the theory of capital as worked out by the Historical School in order to provide a suitable framework for discussing the two competing approaches to financial accounting. Within this framework, it becomes clear that the revenue-expense approach with its emphasis on actually realized, historical transactions plays an important role in creating a tendency towards market equilibrium. Net income determined according to this approach provides information to the market on where there are gaps in the price structure. The balance-sheet approach, on the other hand, and particularly fair value measurement take market equilibrium for granted. Based on fair value accounting, an equilibrium could never be accomplished in the first place. Ironically, in order to be applicable, the balance-sheet approach presupposes the perfect working of the market process, including financial reporting based on the revenue-expense approach.

The OECD considers compliance with the OECD principles of corporate governance and reduced corruption to be positively associated with economic prosperity. Prior empirical research supports this notion for developed countries. However, findings for developing and emerging countries are more diverse, as some studies document an “East Asia paradox” and link higher levels of corruption with positive outcomes at the firm or country level. Our case study on the Socialist Republic of Vietnam contributes to the literature by identifying determinants of these mixed findings. Relying on triangulation, our results suggest that internationalizing and international firms must adhere to OECD expectations to prosper, while domestic firms prefer operating in corrupt but stable conditions. Due to this mechanism, noncompliance with OECD principles and corruption can deter foreign direct investments and thus negatively influence economic growth. Nevertheless, noncompliance with OECD principles and corruption can still work to benefit domestic firms. Given our results for Vietnam, we argue that the internationalization of the business models of the firms analyzed might explain the prior inconclusive empirical findings.