GAAP as a symbol of legitimacy: New York State\u27s decision to adopt generally accepted accounting principles

In this paper, we draw on economic and sociological theories in order to explain public sector incentives to adopt generally accepted accounting principles (GAAP), using the state of New York\u27s decision to adopt GAAP for external financial reporting. We argue that the state\u27s decision to adopt GAAP was an attempt to regain legitimacy for the state\u27s financial management practices. Institutional interests demanding New York use GAAP were part of the sociological phenomenon called institutional isomorphism. Power relations and organizational politics related to the state\u27s budgetary process also significantly influenced the state\u27s decision to adopt GAAP. However, although professional élites made strong statements that GAAP adoption would improve the state\u27s financial management practices, we found no compelling evidence that producing GAAP financial information has significantly altered the state\u27s financial management practices. © 1992