Regulatory capture theory is very much in line with the history of regulation and is therefore more convincing than the regulatory public interest nevertheless, the regulatory capture theory also faces the same criticism as the regulatory public interest theory, such as the lack of a solid theoretical basis. The public interest theory assumes that the economic markets are very fragile and they have a tendency to operate inefficiently and in favor if individual’s concern while ignoring the importance of the society as a whole therefore to direct and monitor the economic markets government’s intervention is required the capture theory. Application of capture theory was the asrb captured by the accounting profession is international harmonisation evidence of capture by large companies, the asx and the accounting profession has the iasb been captured by the fasb 16.
Nevertheless, the regulatory capture theory also faces the same criticism as the regulatory public interest theory, such as the lack of a solid theoretical basis the reason is that the regulatory capture theory does not explain how the regulation is gradually controlled and captured by the industry.
Regulatory capture is a theory that regulatory agencies may come to be dominated by the interests they regulate, rather than the public's interest.
I am required to explain capture theory in my coming 3rd year class on accounting theory the theory is used to explain the necessity of regulation in the disclosure of accounting information and the dynamics between the regulator and the regulated. “regulatory capture” occurs when special interests co-opt policymakers or political bodies — regulatory agencies, in particular — to further their own ends capture theory is closely related to the “rent-seeking” and “political failure” theories developed by the public choice. Accounting theory 5 1 the regulation of financial accounting prepared by: dewan mahboob hossain assistant professor dept of accounting & information systems university of dhaka dhaka bangladesh financial accounting theory craig deegan ch 3. Towards a positive theory of the determination of accounting standards corporate financial statements: a product of the market and political processes financial accounting theory. Capture theory and reeulation the theory states that regulations are manipulated to fit the requirements of those affected by them the theory suggests that.
The theory is used to explain the necessity of regulation in the disclosure of accounting information and the dynamics between the regulator and the regulated what is capture theory the regulated party seeks to take charge (capture) of the regulator with the intention that the rules subsequently released by regulator will be in favour of the regulated party.
Regulatory capture occurs when a governmental agency charged with protecting consumers becomes a captured agency of the industry it is supposed to regulate the captured agency begins to advance. Public interest theory was developed by ac pigou (1932) the author believed that the regulations are prepared in the public interest when they are demanded by the public for correcting inefficient practices.