Corporate governance and earnings management ... - CEREG

Introduction
It was several decades ago that accounting ceased to be considered as a pure technique and
came to be seen as an instrument for social management and change (Hopwood, 1976;
Burchell et al., 1980; Puxty, Willmott, Cooper & Lowe, 1987), i.e. a “social rather than a
purely technical phenomenon” (Burchell, Clubb & Hopwood, 1985, p. 381). Gilling (1976),
as Burchell, Clubb and Hopwood mention (1985, p. 382), not only “notes the fact of and
argues the necessity for accounting change under the impact of environmental (social and
technical) change”, but also attempts to provide “some understanding of the underlying social
and institutional forces at work”.
This article sets out to show that if there is one issue that perfectly reflects the “game”
among the social and institutional forces, goodwill is the one. Based on a study of four
countries which played a major role at the time of the industrial revolution, Great Britain, the
United States, Germany and France, we illustrate the role of four groups of “social forces”
(expression namely used by Burchell, Clubb and Hopwood (1985, p. 382)): lawyers, bankers,
tax administrations and capital markets. We demonstrate that the four countries studied have a
common starting point, a time when the lawyers were dominant, and have made their way to a
common destination, due to the current importance of capital markets. But the routes they
took were different, precisely because the social forces’ roles were distributed differently in
each country.
As Leake (1914, p. 81) pointed out, the “word ‘Goodwill’ has been in commercial use for
centuries, as is shown by the following references to old writers: 1571 Will & Inv. …, I gyve
to John Stephen … my whole interest and good will of my Quarrell (i.e. quarry). … having
given a hundred pounds for my predecessor’s goodwill”.
Our study does not reach so far back in time, but still covers a period of more than a
century, starting from 1880. This can be considered a key date in Germany, the country with
the longest history of goodwill, but also in Great Britain (Bryer, 1995, p. 291). Hughes (1982,
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