| Explicit use of accounting numbers in foreign trade regulation provides incentives for managers to make accounting choices, and production and investment decisions that increase the apparent injury to the firm. By increasing the apparent injury, managers may be able to increase the likelihood of obtaining a favorable injury decision and/or increase the amount of relief granted. The purpose of this dissertation is to test whether managers of firms that would benefit from import protection make income-decreasing accounting choices, and/or production and investment decisions during the period investigated by the federal government.;The basic contributions of this study are fivefold: First, it provides a description of how accounting numbers are used by the federal government to bring about one type of wealth transfer. Second, an expectations model for accounting choices is developed that takes into account the changing economic circumstances faced by firms. Third, evidence is provided as to the relation between foreign trade regulation and managers' accounting choices. Fourth, this study provides a test of the political visibility hypothesis that does not use a size measure as a proxy for political visibility. Fifth, stock returns are used to test whether the use of reported earnings by the ITC affects managers' accounting choices, and production and investment decisions.;Cross-sectional tests are implemented to determine whether the estimated discretionary accruals, and/or production and investment decisions tend to be income-decreasing for the import relief investigation period. The results are consistent with the hypothesis that managers make income-decreasing accounting choices during import relief investigations. The results do not support the joint hypothesis that managers make income-decreasing accounting choices, and production and investment decisions during import relief investigations, and that the stock market reacts to such manipulation. |
