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International accounting standards IAS in French

companies in
in French companies in the 1990s: the 1990s

an institutionalization contested by
US GAAP
Philippe Touron Received 3 April 2017
Revised 18 June 2019
PRISM Sorbonne, Universite Paris I Pantheon-Sorbonne and Labex Refi, 8 March 2020
Paris, France, and 17 July 2020
Accepted 22 July 2020
Peter Daly
Department of Management and Humanities, EDHEC Business School,
Roubaix, France

Abstract
Purpose – The paper analyzes four cases of IAS adoption (A
erospatiale in 1989; Usinor in 1991; Coflexip in
1993; and P
echiney in 1995) to better understand the instructional logics behind the use of alternative or
additional standards by French companies in the early 1990s.
Design/methodology/approach – The study employs multiple case studies to explain how and why the
heterogeneity of adoption (IAS versus US GAAP) is a response to institutional complexity.
Findings – This research shows that French companies adopted IAS as long as they were not required to use
US GAAP by their financial backers. The results highlight how the companies combine logics to respond to the
complexification of the field. The authors outline how endorsement of logics by outside carriers (auditors,
financial analysts, stock exchange commissions) and framing of logics by managers evolve in time and space
within this complexification process.
Research limitations/implications – This study contributes to the institutional complexity literature in
that it focuses on distinct organizational responses to multiple institutional logics. More precisely, the choice of
standards in primary consolidated accounts are viewed as an organizational response to compatible and
conflicting demands from several levels: home countries, transnational areas and host countries with the aim of
raising funds in the US.
Originality/value – This research makes a distinct link between institutional complexity and international
accounting standards and US GAAP.
Keywords International accounting, IAS adoption, US GAAP, Institutional complexity, Institutional logic
Paper type Research paper

Introduction
In the literature, neo-institutional organization theory has been used to explain the adoption
of accounting standards in different contexts at a country level (Albu et al., 2014; Judge et al.,
2010) and to better understand the accounting policies of companies (Aerts et al., 2006; Kury,
2007; M
ezias, 1995). Neo-institutional theory has also been successfully exploited in
international accounting (Chua and Taylor, 2008, Rahman et al., 2010). However, all this
research does not explain heterogeneity and does not take agency into account (Loundbury,
2008). More recently, Guerreiro et al. (2012) have mobilized institutional logics to explain the
adoption of IFRS by unlisted companies in Portugal. Alon (2013) showed that Russian
companies face institutional complexity because the adoption of IFRS was not accompanied
by the abandonment of local GAAP. Institutional complexity has also been used to explain
the adoption of IFRS standards at the national level in Japan (Matsubara and Endo, 2018). In
this study, we focus on distinct organizational responses to multiple institutional logics and Accounting, Auditing &
Accountability Journal
why the heterogeneity of adoption (IAS vs US GAAP) is viewed as an organizational response © Emerald Publishing Limited
0951-3574
to institutional complexity. DOI 10.1108/AAAJ-04-2017-2899
AAAJ Our study has several contributions. Like Stolowy and Ding (2003), we focus on the
alternative accounting standards, which are the US accounting standards issued by the
Financial Accounting Standards Board (henceforth, FASB) and the international standards set
by the International Accounting Standards Committee (henceforth IASC). However, here we aim
to understand why French companies opt for US or international accounting standards or a mix
of both as well as to ascertain why companies stop using IAS in favor of US GAAP. More
specifically, we analyze the various combinations of logics via four case studies of adoption:
A
erospatiale in 1989; Usinor in 1991; Coflexip in 1993 and P
echiney in 1995. We also add to the
literature on institutional logics and complexity in that we demonstrate how companies
responded to a change of logics at the field level. Indeed, Stolowy and Ding (2003) expressed the
need “to look further into the question of identifying the fields that cause most of the divergences
between the requirements of International Accounting Standards (henceforth, IAS) and/or US
GAAP and the accounting practices of French companies” (p. 211). We also add to the literature
on institutional logics and complexity.
By analyzing the various combinations of logics via four case studies of adoption, we
demonstrate how companies accommodate the moving logics within the field and respond to
the complexification of the field (i.e. the translation of logics). We also outline how
endorsement of logics by outside carriers (auditors, financial analysts, stock exchange
commissions) and framing of logics by managers evolve in time and space within this
complexification process. This complexification is at corporate level and the complexity is not
a given of the field, but it is built into the response of each company where embedded agency
matters. Therefore, we show how logics interact vertically and further explicate intra-
institutional heterogeneity and complexity.
The period under study coincides with the period when the IASC started to integrate
elements of a financial market logic within a professional logic. At the same time, US GAAP
became dominant. Ultimately, the EU abandoned the State/Public logic. Thus, this study also
contributes to the globalization of the accounting field by studying how the transnational
standards interact with carriers of logics inside and outside the firm at the company level.
This study enables a greater understanding of the roots of the dynamics in the transnational
accounting fields. By doing so, it goes some way to responding to the concern of Gillis et al.
(2014, p. 897), namely “There is a new multilayered discourse emerging on the transnational
regulation of accounting that is being populated with arguments by multiple and sometimes
competing stakeholders who are operating in response to different incentives, and this
dynamic needs to be understood.”
We focus on the period between 1989 and 1995 for two main reasons. First, the first half of
the 1990s represented the pre-institutionalization period of IAS and marked the arrival and
domination of financial market logics and required accommodation in the preparation of
consolidated accounts in France. Only 94 companies worldwide referred to IAS, but France
and Nordic countries dominated the list (Andrew, 1992). Second, various alternative
standards were used in the annual reports of major French industrial companies with
different types of adoption practices in evidence (Walton, 2011). As of 1988, the French
accounting standards applied to consolidated accounts were not really constraining. Thus,
accounting policies could be compliant at the same time with IAS or even US GAAP.
Furthermore, several doctrines, which interpreted the accounting standards, emanated from
different organizations, such as the Conseil National de la Comptabilit
e (CNC) and the
Commission des Op
erations de Bourse (COB). The period of our study also coincides with that
of Stolowy and Ding (2003) but ends before the implementation of the reform of
standardization in France in 1996. Indeed, Samsanova-Taddei and Humfrey (2014) call for
a country-specific analysis of the articulation of logics around a dominant one.
This article is divided into six sections. In the first section, we describe the theoretical
perspective employed. The second section outlines the three institutional logics at play.
The third section focuses on the research method and case selection and the fourth on the IAS in French
results of the case-by-case analysis. The fifth section makes a case comparison as part of the companies in
discussion and conclusion is in the sixth section.
the 1990s
Theoretical background
Institutional logics
Originally, neo-institutionalism explains mimetic behaviors among organizations by three
institutional isomorphism mechanisms: coercive, mimetic and normative (DiMaggio and Powell,
1983, p. 147). In the accounting field, Mezias (1995) highlights the pressure toward isomorphism
to explain the diffusion of accounting policy among US companies. Adoption of IAS is a
response to institutional pressures (Touron and Daly, 2013; Touron, 2005). Lounsbury (2008)
discusses the shift from explanation of isomorphism to the understanding of heterogeneity of
practice as the response to the diversity of demands emanating from institutional environments
in accounting practice. Institutional logics are overarching sets of principles that prescribe “how
to interpret organizational reality, what constitutes appropriate behaviour, and how to succeed”
(Thornton, 2004, p. 70). They are shaped by economic and social structural changes and provide
guidelines on how to interpret and function in social situations (Greenwood et al., 2011).
Thornton et al. (2012) set out an institutional logic perspective with seven categories (family,
community, religion, State, market, professional and corporation logics), three (State,
professional and market) of which have inspired this paper.
A key assumption of institutional logic is embedded agency, which means that the
interests and agency of individuals and organizations are embedded within institutional
logics (Thornton and Ocasio, 2008). Johed and Castasus (2015) show how institutional logics
modify the perception of individual shareholders. Guerreiro et al. (2012) mobilize institutional
logics to explain the switch from “civil law logic” to a “common law logic” as exemplified by
IFRS adoption. The process of adoption is not the blind adhesion to IFRS but a process which
depends on prevailing institutional logics. However, conformity is driven by assessments of
the relative importance of such pressures.
In our study this means that full adoption of US GAAP should facilitate the reception by
US shareholders, and that keeping local or IFRS standards may require more explanation.
Accounting standards are elaborate and endorsed by several actors (State, profession and
markets/investors). These actors can be considered as different institutional orders (Durand
and Thornton, 2018). Thus, a change in the dominant logic (from State to professional or from
professional to financial market) brings about a change in the cultural framework, perception
and interpretations of actors and organizations. The financial statements serving as an
interface with different stakeholders, fulfill several functions and are a means to show
commitment to a logic (Alon, 2013, 2012: 79).

Institutional complexity and organizational responses

Thus, institutional complexity arose due to an overlap in institutional orders and incompatible
prescriptions (Thornton et al., 2012; Raynard, 2016), such as when organizations work across
institutional spheres with contradictory prescriptions (Smets et al., 2012) or encounter different
constituents with divergent demands (D’Aunno et al., 1991; Heimer, 1999). Several
interpretations of standards may coexist, particularly in the field of international accounting
standards. Local standard setters must respond and incorporate multiple logics (Matsubara and
Endo, 2018). In the French accounting arena, the companies being studied faced competing
prescriptions from different institutional logics within a heterogenous field. In this study, we look
at how the multiple logics, and as a result, the organizational complexity emanate from an
institutional order (state, profession, financial market). Literature on corporate governance
explains how companies incorporate elements from both national and American origins
AAAJ (Fiss and Zajack, 2004; Meyer and H€ollerer, 2010). Dai et al. (2017) study companies accounting
responses to institutional complexity when state-owned companies went public in China.
Management accounting has been shaped simultaneously by State, professional and financial
market logics, and permit the companies to maintain their hybridity.
Furthermore, logics, which initially were seen as contradictory, may be re-interpreted to be
compatible, i.e. they are “not fully aligned with the ‘other’ but can accommodate it” (Smets and
Jarzabkowski, 2013, p. 301). Goodrick and Reay (2011) posited that an increase in one logic
does not necessarily mean a decrease in the strength of another. Therefore, they surmised
that logics are “facilitative” with a change in one logic facilitating a change in another or
“additive,” whereby multiple logics coexist based on institutional demands (Goderick and
Reay, 2011). If we apply this to our study, this means that a firm’s accounting policies may be
compliant with standards from different setters (IASC, European or even US GAAP) at the
same time, and represent different logics. The degree of compatibility may evolve over time
(between 1988 and 1995).
Different responses have been explored when dealing with multiple conflicting
institutional logics such as hybridization: (Battilana and Dorado, 2010), selective coupling
(Pache and Santos, 2013) or reactive coupling (Narayan et al., 2017). Another response is
mimicking dominant (i.e. the most legitimate) role models, or rejecting or avoiding non-
preferred logics (Oliver, 1991; Pache and Santos, 2010). Other responses have been identified
in the literature such as geographic separation (Lounsbury, 2008), balancing (Smets et al.,
2015), deferent behavior and symbolic interaction (Jourdan et al., 2017) and segmenting,
bridging and demarcating (Smets et al., 2015).

Three logics at play around the internationalization of standards in France

In this study and from an empirical point of view, each existing standard in a French context
is a priori characteristic of three different logics: (1) A professional logic due to the desire for
international credence gained from the IASC; (2) A State logic in compliance with the
European rules enacted by the French government, namely the Seventh Directive; and (3) A
financial market logic as companies wished to raise funds, and hence, had to adhere to US
GAAP. The various standards as outlined below are attached to a dominant logic.

The emergence of international standards at a transnational level

At the international level, the IASC published international standards (IAS). However, the
IASC lacked the power to enforce these standards. These standards were subject to
significant technical developments. Since 1988, alternative accounting treatments for the
same transaction were possible, which constituted a major obstacle to the credibility of the
IAS (Taylor et Jones, 1999; Street et al., 1999; Cairns, 1999). Therefore, the IASC committed
themselves to reducing the number of options allowed by the different standards by
approving Exposure Draft 32 (IASC, 1988). In July 1989, the IASC published a framework for
the preparation and presentation of financial statements to ensure the consistency of
standards (IASC, 1989d). The framework indicated that the users of financial statements were
diverse, but that investors’ needs subsumed those of the State, creditors, employees and
suppliers, which was evidence of the introduction of a burgeoning “financial market logic.”
Indeed, 1989 was a pivotal year for the IASC as new accounting standards were added such
as IAS 27 concerning overarching themes for consolidation, IAS 28 regarding investments by
equity method, and IAS 31, which introduced the proportional consolidation for joint-
ventures (IASC, 1989a b, c). At the same time, the IASC structured its relations with outside
organizations, and tried to increase its legitimacy regarding different actors. The
achievement was clear for relations with national standard setters (Cairns, 1999), but the
International Organization of Securities Commissions (IOSCO), dominated by the Securities
and Exchange Commission (SEC), did not endorse the IAS (Camferman and Zeff, 2007). As IAS in French
well as the aforementioned technical changes, a field emerged around international standards companies in
(Botzem and Quack, 2009). In 1988, the FASB were invited to attend the Board meetings of the
IASC. Prior to that, FASB had already begun to make technical contributions as a member of
the 1990s
the Consultative Group (Camfferman and Zeff, 2006). From 1990, the IASC organized an
annual conference with 20 standards setting bodies in order to achieve greater comparability
between IAS and national standards (Cairns, 1999).
Even if members of securities commissions in several countries were involved in the work
of the IASC, members of IOSCO were also associated with the proposed comparability.
Henceforth, the IASC took the opinions of the securities regulators into account since one of
the four criteria explicitly used to choose between accounting alternatives was “the opinion of
regulators and their representative organizations, such as IOSCO (IASC, 1989d, p. 12).
Meanwhile, the IAS did not have enough legitimacy, but numerous actions were implemented
to gain greater legitimacy not only at an international level but also in France (Ramirez, 2010).
French actors, who were heavily involved in various organizations able to influence the
content of standards, played a key role in structuring the field. As of 1987, the IASC was
chaired by Georges Barthes de Ruyter, a professional accountant who was of French
nationality. After leaving the IASC, Georges Barthes de Ruyter took the chairmanship of the
foundation working party in 1992 in charge of reviewing the structure of the IASC. This
increased awareness of IAS in France (Camfferman and Zeff, 2006). In addition, one of the
representatives of IOSCO was a French regulator. These key positions held by French
nationals facilitated interactions with the IASC, and they contributed to the acculturation of
IAS in the minds of the French.
Despite the technical improvement of standards (IASC, 1988; 1989a, b, c, d), in 1989, the
institutionalization of the IASC can be considered as weak both internationally and in France.
Internationally, the IASC was struggling to institutionalize its standards, by implementing a
strategic alliance with agencies such as standard setters and organizations that regulated the
stock exchange, which supported and enforced the standards. The objective of the
accounting profession, through the IASC, was to diffuse the standards among companies in
Europe and worldwide (Andrew, 1992). In France, both professional organizations
(Compagnie Nationale des commissaires aux comptes: National Auditing Body, and Ordre
des Expert-Comptables et des Comptables Agr
e
es: Order of Expert and Chartered
Accountants), which were represented at the IASC, were not the enforcer of accounting
standards. Hence, the adoption of IAS was voluntary because the standards were only
enforced by auditors and not by the law, nor by the COB. But there was a movement in favor
of IAS up until 1996 with very few exceptions.

Europeanization of French rules at the local level

In the early 1990s, the accounting policies of French listed companies had to conform to the
French national standards, which was the national transcription of the Seventh Directive.
Those who used the standards were diverse and pursued several objectives: creditors,
employee and citizens. The enforcement followed the principles of regularity (compliance
with the law) and sincerity (“good faith”) which, even if compatible with “True and Fair view,”
constituted a restrictive interpretation of it (Burlaud, 1993). Standards for consolidated
financial statements were incorporated into law in the mid-1980s in France with the 1985
Accounting Act (Law No 85-11 of 3 January 1985), which implemented the European Seventh
Directive. This law was completed by several additional texts such as 86-221 Decree of 17
February 1986; Order of December 9, 1986; COB Bulletin 210 of January 1988; Bulletin 218 of
October 1988 and the Decree 86-221 of 17 February 1986. This law became applicable as of
1988. Doctrine recognized the importance of this law explicitly, and Corre (1989) explicitly
AAAJ referred to the 1985 Act and the ensuing Decree 86-221. It also created a situation whereby
French companies had an extensive range of choices in accounting policy for consolidated
accounts. As well as the applicable French legislation (French implementation of the
European Seventh Directive), companies also referred to other organizations which published
interpretations of accounting standards such as the CNC and those of the COB (COB, 1988a, b),
All companies had to produce consolidated financial statements in compliance with the
French rules.

The dominance of US GAAP on US stock exchanges

In the USA, the regulation of financial reporting was in the hands of the SEC. The FASB had
only delegated powers (Palmon et al., 2011). As a result, when securities were issued on the US
financial markets, foreign companies had to adhere to the SEC authority [1]. Even if French
companies were not subject to strict rules like their US counterparts, the rules applied were
much more demanding than the European rules as trading on a US market required more
disclosure to investors (Narayanaswamy, 1996; Radebaugh et al., 1995). As a result, US
regulations, including US GAAP, had a major impact on the French companies that issued
shares on US markets. In 1990, the SEC adopted Rule 144A which facilitate the registration of
foreign companies if they placed their securities privately.
Prior to 1988 the professional logic (as recognized by the COB) was the only logic that
prevailed. However, after 1988, with the application of the 1985 Law, State logic was
introduced with a stakeholder orientation. The members of the IASC were immersed in a
professional logic and in France, the first compliance and adoption of international standards
can be justified by the need to achieve international certification (Touron, 2005; Touron and
Daly, 2013). In 1989, a market finance logic emerged due to the internationalization of the
capital of French companies abroad. The IASC set up a conceptual framework based on the
American model and indicating that the standards were intended for investors (Botzem and
Quack, 2006).

Research method
In this section, we outline the choice of the period of study, the case selection and the research
approach.

Period selected
The 1989–1996 period is unique because three sets of standards were competing for
legitimacy in Europe and more particularly in France. The French legislation allowed French
companies to align their accounting practices with international standards and to foreign
standards such as US GAAP without violating the rules in France (SFAF, 1988). This meant
that the regulatory framework governing the preparation of consolidated accounts in France
involved standards from several origins: European legislation, the accounting profession and
stock exchanges, which competed with one another.
On the demand side, States were using privatization and MNCs were globalizing (Sukhdev
and Leaver, 2007). Consequently, more companies were seeking cross-border listings. French
companies used IAS or US GAAP as a complement or in parallel to French national
standards. As of 1986, some well-known French industrial companies had adopted IAS.
Among the 100 biggest industrial companies, which made reference to alternative standards,
less than 20% of companies were using international standards in 1986. There was a big
increase in 1989 (Ding et al., 2003). The number of companies using standards labeled
“international” went from 24% in 1988 to 31% in 1989, and this figure exceeded 35% in 1993
(X, 1986).
 However, adoption practices were very diverse. Some companies complied with IAS and IAS in French
at the same time they refer to some US GAAP to prepare their consolidated accounts. Some companies in
companies produced a tabular reconciliation with US GAAP of the accounting figures,
earnings and shareholders’ equity. Therefore, the implementation of IAS did not lead to full
the 1990s
harmonization of accounting policies because of alternative treatments. Companies that
issued shares in the USA had to comply with the SEC regulations, which were more or less
stringent depending on the level of the American Depository Receipts – ADR
(Afterman, 1995).

Case selection
We carried out case study research on four French companies abiding by a State logic
(A
erospatiale, Usinor, Coflexip and P
echiney), whose managers were confronted with two
other logics: (1) the professional logic, which resulted from the internationalization of
operations; (2) the financial market logic, which arose from being quoted on French or US
Stock Exchanges. However, despite this State logic, all four companies decided to adopt IAS
or US GAAP. The modalities of adoption were different for each company. The focus was on
the adoption of alternative accounting standards in order to establish the company’s financial
statements in a particular year. More specifically, we studied the compliance options for
accounting frameworks (either French, International or US) as certified by auditors in the
main annual reports published in France.
The cases selected in this research, make it possible to highlight the different choices
available to companies, and aims at theoretical replication i.e. extending a new explanatory
theory to a large number of circumstances (Yin, 1994). In line with Humphrey and Scapens
(1996, p. 96) “individual case can provide rich interpretations of research problems through a
synthesis developed by the researcher to go beyond the cases considered.” Hence, the
objective here is to obtain representative and not significant cases. In our research,
institutional logics are applied to international accounting choices.

Research design
This research is based on the comparative case study as defined by Yin (1994) and inspired by
Carnegie and Napier’s (2002) work on comparative international accounting history (CIAH). This
methodology permits us to identify the conditions surrounding these adoptions, and also the
rationale that motivated this adoption. This research is based on theoretical triangulation
(Hoque et al, 2013), whereby different theoretical approaches are analyzed in parallel in order to
ascertain the reasons for the compliance with alternative accounting GAAP.

IAS,
A
erospatiale US GAAP,
(1989) IAS, Usinor (1991) Coflexip (1993) IAS, P
echiney (1995)

Former GAAP French French French French-IAS

Adoption in full IAS International-French US GAAP US GAAP French
US GAAP No Yes No Yes, retrospectively
reconciliation
Ownership Structure Direct State- Direct and Indirect Initial Private State-owned
before adoption owned State-owned Offer Privatization
Competition Duopoly Fragmented sector Competition Oligopoly
Structure concentration
Change in No Privatization four IPO Privatization the Table 1.
Ownership years after adoption year of adoption Case selection criteria
AAAJ The definition of the boundaries of the case studies was based on a single criterion. We
assumed that a company, whose consolidated financial statements referred to IAS or US
GAAP and which were certified by auditors, applied an accounting policy in conformity with
either IAS or US GAAP. The cases were selected according to a set procedure with the aim of
considering specific situations, highlighting salient facts and theories.
Our case studies look specifically at the adoption of alternative standards by a company at
a given time in a particular context (Carnegie and Napier, 2012; Walker, 2008). By comparing
the situation prior to and after adoption, we can establish the two states that mark the change
in logics, and by analyzing periods beyond one year, it was possible to analyze incremental
change of accounting policy and then identify the emergence of incompatibilities. Miles and
Huberman’s (1994) chronological and thematic table helps us to organize the data and link
them to the concepts. We used written text such as standards, press articles and press
releases, legislation and transcripts and quantitative data such as financial statements
analysis. In this study, we have also included quantitative data (financial analysis of each
case) given the nature of the subject, and the necessity for enriched data to explain
phenomena in the data reduction phase. We also interviewed six actors for 45 minutes to two
hours in each of the four companies. These interviews were not transcribed but enabled us to
triangulate the data collection or promote alternative perspectives. In the next section, we
outline the individual case studies in order to understand what occurred, and to highlight the
specific changes in each specific corporate context.

Results
Case study 1: The adoption of IAS by A
erospatiale in 1989
A
erospatiale, a State-controlled aerospace manufacturing company, owned more than one-
third of the European Airbus Consortium (the three others owners were Deutsche Airbus in
Germany – 37.9%; British Aerospace in the UK – 20%; and Construcciones Aeronauticas S.A.
(CASA) in Spain – 4.2%) (The Economist, 1983, p. 59). In the late 1980s, A
erospatiale faced
major financial difficulties (Le Monde, 16 June 1987), they owned 39% of Airbus (The
Economist, 1986, p. 79) and two-thirds of their sales were already made abroad.
A switch to IAS while complying with State logic. A
erospatiale complied with IAS, and the
adoption was certified by the former auditors as of 1989 (A
erospatiale Annual Report, 1989).
The accounting manager minimized the effects of the changes in the method, but specified
that they posed mainly interpretation problems: ‘The adjustments (were) not significant except
for leasing reprocessing operations, the pension obligations that had to be considered, and the
holding of the Economic Interest Grouping that had to be accounted for following the equity
method because of IAS; Negative impacts were primarily a problem of interpretation of the
substance rather than the form vis-a-vis the auditors. IAS was more difficult to apply than the
US standards’ (Insider Interview). Adoption was substantial in that it involved some changes
such as the consolidation method, but the overall appearance in practice remained consistent
with French rules. The presentation of expenses by nature, and the highlighting of
intermediate balances remained. Hence, accounting policy was compatible with both IAS and
national standards.
IAS as a response to potential financial logic. From a managerial point of view, the need to
increase equity as of 1987 appeared two years before adoption and management said: “We will
increase our capital by turning either to the State or to the public. 35% of the FF 12 billion
needed could come from our own funds” (Interview published in Le Monde, 16 June 1987). The
need to raise capital was confirmed (after adoption) by the accounting officer who said: “The
choice of GAAP is the financial strategy the long-term goal being the presentation of accounts in
accordance with internationally recognized principles for an intervention in the US markets. The
industry was capital-intensive and European markets were too narrow” (Insider interview).
These declarations show that the “financial market logic” was present in the minds of IAS in French
management. Hence, adoption of IAS took place in order to avoid a loss of legitimacy in case companies in
funds needed to be raised. The company needed capital, and the adoption undoubtedly
responded to the directors’ concerns to report to foreign investors. Indeed, there was no influx of
the 1990s
foreign shareholders and no capital increase took place over the study period. It appears that
IAS were considered as sufficient to answer ex ante a financial market logic while still being
compliant with a State logic. Management adopted IAS to increase legitimacy vis-a-vis potential
shareholders. When analyzing the A
erospatiale financial policy, first we found that funds came
from bond issues and not from shareholders. Second, the company was facing an
internationalization of its debt two years after adoption. There was a marketization of debt
but not of capital. Debt reached an abnormally high level at the time of the adoption of
international standards. Medium- and long-term debt represented 1.37 times the net worth in
1989. Two years later, its value was twice that of equity, the ratio of medium- and long-term
debt over net worth increased from 1.37 the year of adoption to 2.34 three years later, increasing
to 1.42 in 1990, 1.96 in 1991, and 1.99 in 1993 respectively. The ratio deteriorated sharply after
adoption, not because of losses, but because the most recent financial backers were creditors
and not shareholders. Structurally, creditors represented a significant proportion of the
resources mobilized in the company (financing of investments). Prior to adoption of the
international accounting standards at A
erospatiale, the company had already issued bonds in
French Francs and Euro Francs, the last being issued in 1987. Moreover, these debt securities
were listed on the Luxembourg Stock Exchange. It was not until 1991, two years after adoption,
that the group issued bonds again, this time abroad and in increasing numbers. Between 1991
and 1993, several issues were made on Euromarkets. Most of the loans issued between 1991 and
1993 by A
erospatiale were in FF (FF 8,440 million). One loan issue in September 1991 was
100 million ECU (i.e. FF 698 million), and another was 100 million Swiss francs (FF 377 million)
in May 1993. Structurally, the aerospace industry needed capital. In addition, it was impossible
to issue shares due to State control. Hence, management had no choice but to turn to creditors.
These two imperatives explained the high level of debt ratio. Therefore, managers had an
incentive to provide relevant information to creditors. The company issued currency bonds two
years after adoption, which demonstrated a commitment to foreign backers that international
standards were adopted in anticipation. This choice resulted in sending a strong signal to
financial backers of the management’s ability to meet the demands of potential investors. The
financial market logic is anticipated.
The rejection of US GAAP: dominance of professional logics. The standards chosen to
prepare A
erospatiale’s financial statements were legitimate in the eyes of their accounting
director, and in his opinion, US GAAP was not a viable solution: “The Statements of Financial
Accounting Standards (SFAS) are primarily national, IAS is a synthesis of continental
standards and Anglo-Saxon standards (greatest common denominator), and we can therefore
influence these standards and participate in their development. Lobbying is very important
because it would be dangerous to apply the standards that we cannot influence” (Insider
interview). Therefore, A
erospatiale management had rejected US standards, which were
nevertheless used by the main competitors. Indeed, comparability with competitors was not
even sought. “Our accounts are conservative compared to Boeing which capitalized the start-up
cost, which were then amortized over a number of airplanes” (Insider interview). The
standards were not imposed but were a choice by management.
Alignment with other French multinationals. Boeing, the main competitor of A
erospatiale,
used US GAAP. Thus, according to a financial market logic, A
erospatiale’s management
should have adopted US GAAP as a result of “competitive isomorphism,” but they referred
only to IAS. They had the choice between at least two models: they either aligned themselves
to their main competitor Boeing or to other French/European multinationals. The turnover
growth was significant: FF 38,217 m in 1988 to FF 50,850 m in 1993; however, with volatility
AAAJ in growth:
11.29% in 1989, 3.93% in 1990, 37.88% in 1991, 13.73% in 1992 and
7.97% in
1993 respectively. As indicated by the distribution of turnover, exports represented two-
thirds of turnover. The choice made by A
erospatiale’s management was not isolated but
corresponded, on the contrary, to a general trend affecting large French industrial companies
(such as Bongrain, Canal þ, CBM Packadging, Schneider and Valeo), which could be
considered as mimetic behavior. The reference model was the IASC model supported by
accounting professionals at a global level and by accountants inside the firm, which resulted
in a convergence of thinking.

Case study 2: The adoption of IAS and disclosure of US GAAP reconciliation by Usinor
in 1991
Usinor was the third largest European State-controlled steel group and its management
referred to international accounting standards, which resulted in changes of some options in
accounting policy: “the group decided to adopt international GAAP recommended by the
International Accounting Standards Committee (IASC)” (Usinor, 1991 Annual Report,
page 12).
A switch to IAS and reference to US GAAP. They also indicated compliance of their
accounting policy with French law and the decree that implemented this law.
Simultaneously, references to specific Statements of Financial Accounting Standards
(SFAS): SFAS 87 and SFAS 106 in 1991 and SFAS 106 and SFAS 109 appeared in 1992.
Furthermore, a reconciliation of equity and earnings with US GAAP appeared in the notes
of the consolidated financial statements without the constraint of 20–F.
Fund raising as an anticipation of financial market logic. Seeking capital could therefore
have only potentially played a role in the adoption, albeit with a significant time lag. Despite
an apparent willingness to raise funds as of 1991 (The Economist, 1991b), the privatization
campaign began in 1993 after Usinor’s management showed interest in raising funds on the
European rather than on the US markets. Hence, it could not have been the catalyst for
adoption. In 1991, a French nationalized bank, the Cr
edit Lyonnais, injected a financial
package of up to 20%, leaving the State with a direct share of 80%. This did not change the
structure of control because “after paying for Usinor Shares, Credit Lyonais raised money

Pechiney
Earnings P
echiney Operating Income P
echiney Equity P
echiney
France US France US France US

1993
980
2 286 133 % 984
408
141 % 72 911 73 202 0.40 %
1994
3 753
3 181
15 %
2 351
1 348
43 % 69 645 69 562
0.12 %
1995 1 465 1 465 0% 5 265 2 985
43 % 56 465 56 005
1 %
1996
2 979
2 979 0%
2 021
2 021 0% 8 609 8 567 0%
1997 1 817 1 817 0% 3 313,3 3 313 0% 9 106 9 076 0%

USINOR
Operating
Earnings Income Equity
IAS US France US

Table 2. 1991
3 032
2 556 þ19 % 23 669 24 325
3 %

Comparison between 1992
2 421
1 867 –% 20 973 22 283
0.12 %
earnings and equity for 1993
5741
5062 0% 15 080 17 119
1 %
Pechiney and Usinor 1994 1 006 1 713 0% 16 012 19 862 0%
through a rights issue of its own, most of which is being taken up by the government” IAS in French
(The Economist, 1991a, p. 103). In 1995, four years after adoption, the share of State companies in
ownership was only 9.84%; with Cr
edit Lyonnais at 2.51%; workforce at 3.56%; OTC sales at
15%; Usinor Sacilor (employees) at 0.40 % and public ownership at 68.69 % (COB, 1995).
the 1990s
The guarantee of the State as a barrier to the financial market logic. Even if there was a
marketization of debt at the time of the adoption, the guarantee of the State enabled an
unusual level of debt, and thus, limited the pressure of a financial market logic. Therefore, the
State Logic dominated. The relative weight of debt to equity emphasized the prominence of
creditors. Medium- and long-term debt represented more than 90% of equity. This debt level
increased subsequently to 118% following the adoption of IAS. The ratio (net income/equity)
decreased every year: 0.33 in 1989; 0.14 in 1990;
0.12 in 1991;
0.13 in 1992,
0.32 in 1993
and 0.10 in 1994. From 1989 to 1992, the share of foreign funding went from less than a
quarter to half of the total funding. The year of adoption, funding in foreign currencies
already corresponded to 45% of the amount of borrowing. They represented 40% of funding
in 1993. It is important to note that all borrowings were denominated in dollars in 1991.
Between 1991 and 1992, Usinor issued bonds for a total amount of around USD 250 m [2].
There was also an influence from the rating agencies. Standard and Poor’s gave a A-1 rating
for FF 10 billion in commercial paper to Usinor Sacilor (New York Times, 31 January 1992)
and Moody’s offered a first-time Prime-1 rating (Reuters News, 30 January 1992). The
agencies rating may have played a role in the adoption of IAS standards. The use of
reconciliation to US GAAP translated this financial market logic.
IAS as an acceptance of professional logic. The normative influences were twofold: external
from auditors but also internal from management. In the year of adoption, the consolidated
financial statements were for the first-time subject to real international certification. Up until
1990, the financial statements were certified by statutory auditors, namely Calan Ramolino
and Frinault Fiduciare (French audit firm that were part of Arthur Andersen network), the
designated auditors in 1987 represented by Mr. Barthes de Ruyter (ex-Chairman of IASC),
However, as of 1991, an Americanization of the certification process emerged. This resulted
mainly in the emergence of a new personality, Mr. Grossman, who represented Arthur
Andersen directly in the US working within US GAAP context. Managers of Usinor clearly
favored IAS and rejected US GAAP. Therefore, we can state that a professional logic
dominated the financial market logics. IAS was mainly a way to provide the firm with an
international identity.
Usinor management clearly preferred the IASC international standards. The accounting
officer explained that Usinor was European: “The FASB is a national standard-setter that
sticks to the US GAAP adapted to the US environment [. . .] there are no communication
problems provided that the differences between IAS and US figures are small” (Insider
interview). Management were receptive to IAS standards. Interestingly, the accounting
director of Usinor became Vice President of APDC (Association des Professionnels et
Directeurs Comptabilit
e et Gestion – Association of Accounting and Management Directors)
[3] and the accounting director of A
erospatiale became President respectively. These
positions not only enabled them to respond to exposure drafts of standards in the name of the
largest French companies, but it also gave them informal access to IASC Board members. As
a result, they legitimately believed (see verbatim above) that they could exert more influence
on IAS than on US GAAP.
Reconciliation with US GAAP as a response to financial market logic. Usinor was already a
multinational company since most of its turnover was foreign. Indeed, Net sales abroad
represented two-thirds of the total turnover of the group. It increased from 12.4% in 1991 up
to 16.78% in 1994 in the USA, and from 13.5% to almost 15.5% for the rest of the world. In the
EEC, it decreased a little from 40 % to 36%, whereas in France, it also decreased slightly from
34% to 31.75%.
AAAJ The reference group did not seem to be the steel sector but simply European companies.
The IAS standards were considered by management as a “European” brand. The driving
force behind adoption was geographical rather than sector based. For Usinor: “There were no
communication problems provided that the differences between IAS and US figures were low
[. . .] the competitors were Japanese (Nippon Steel) and Korean, and they used FASB
standards. Europeans competitors adopted IAS. Disclosure of reconciliation sufficed to
ensure comparability with competitors in the secto. . .” (Insider interview). Finally,
comparability with competitors was easily satisfied via reconciliation. The amount of
earnings and shareholders’ equity was systematically greater when calculated according to
US standards.
In addition, the differences tended to increase with time. Usinor adopted SFAS 87 and 106
in 1991 and SFAS 109 in 1992. Thus, all things being equal, the voluntary disclosure of a
reconciliation table provided a less negative image of the group. The reconciliation with US
GAAP is enough to respond to the financial market logics, which emanated only from
“competitive isomorphism” from competitors.

Case study 3: The adoption of US GAAP by Coflexip in 1991

Coflexip was under the control of l’Institut Français du P
etr^ole, which was a state-controlled
entity of an industrial or commercial nature (EPIC –
etablissement public a caractere industriel
et commerciale: public institution of an industrial and commercial nature). Coflexip changed
accounting policy and started to publish consolidated statements according to US GAAP in
1993. The income statement was completely overhauled following the adoption of US GAAP.
The income statement included in the financial statements was similar to that of the SEC
registration document, the 20-F report (Coflexip, 1994).
The adoption of US GAAP as a response to financial market logic. First, the sale of
company shares on the financial market in the US on November 17, 1993 developed share
capital. Second, one year later on December 7, 1994, shares were quoted on the Paris Stock
Exchange. At the time of the merger with Stena International, a percentage of Coflexip’s
shares were reserved for the shareholders of Stena International (Lascelle, 1994). There was
an increase in capital from 1992 to 1995 as a result of the IPO. The public shareholding
increased from 0% in 1992, 29.91% in 1993, 47.26% in 1994, and 49.68% in 1995, up to
59.77% of capital in 1996. We note that the percentage of capital made public represents
approx. 50% of shares two years after the adoption of the standards in 1993. The shares were
not quoted the year preceding the first increase in capital. An IPO enabled company capital to
be made available to the US public. As this involved a greater circulation of capital to the
public, there was a need to transmit comprehensive information to them as well. According to
the French statutory auditor: “the financial information is above all destined for US investors”
(Outsider interview).
According to the second auditor of US nationality and training: “The companies who
finance themselves on the US market are obliged to adopt the US standard or provide
reconciliation. Only those companies who do not have to raise finance on the US market have a
choice” (Ousider interview). Therefore, the market pressure, as translated by auditors, was
clearly the catalyst of adoption. Interestingly, here, the auditors were the carriers of US GAAP
as the solution as prescribed by the financial market logic.
At Coflexip, the percentage of long- and medium-term debt represented 53%, 43%, 89%,
95% and 82% of shareholder’s equity from 1992 until 1996. The relative weight of foreign
creditors increased over time. In fact, debt in dollars represented 60% of long- and medium-
term debt in 1994. The financing of the acquisition in the US explained the increase and the
loan offer in dollars. The acquisition of Stena offshore at the end of 1994 was financed with an
obligatory loan of USD 98,000 (FF 523,908). Moreover, the obligations issued were convertible
into 2,227,272 ordinary shares between 15 December 1996 and 15 December 1999. The IAS in French
distribution of debt currencies of Coflexip from 1993 was 20.3% in 1993, 85.7% in 1994, companies in
88.7% in 1995 and 90.7% in 1996, of which of US debt in dollars represented around two-
thirds in average. However, debt in dollars increased heavily after adoption.
the 1990s
Compliance with the French rules as a manifestation of State logic. While the accounting
policies of Coflexip were elaborated by following the US standards, the accounting policy
remained compliant with the French rules.
The US securities legislation applicable to Coflexip, due to the flotation on the
NASDAQ had a major effect on the accounting policy. It resulted in a significant increase
in the amount of information which must be provided to investors. In fact, the flotation
created a dependence between the SEC and the company: “The flotation is the trigger and
even if other factors must be considered, the people that played a role such as the banks
underwriters are maybe not excluded” (Outsider interview). Because the companies
received funds from investors, the rules concerning disclosure were the most binding. The
company produced an extensive financial statement in US GAAP in the French financial
statements instead of a reconciliation of the 20-F form: “The adoption of the standards is
linked to the NASDAQ. The US standards are a national referential” (Outsider interview).
Nevertheless, all things being equal, the year of adoption of the US standards
corresponded to the arrival of what can be termed as a “pro-US GAAP” attitude. In fact,
it was a US auditor, who was working as the French representative of Ernst and Young
who was responsible for the “transition” towards US GAAP. He convinced management
that the potential share subscribers valued a comprehensive use of US GAAP much more
than reconciliation. At the same time, the auditors and to a lesser extent the banks found a
receptive terrain. In fact, Coflexip’s management, who did not have a strong grasp of the
financials, as they were engineers, distanced themselves from accounting issues and did
not question the auditors. The adoption did not result in a conscious choice but imposed
itself naturally due to the position forged and then relayed by the active lobbying of the
auditors: “The reconciliation was not chosen [. . .] not discussed during the AGM. I’m saying
that the problem did not come up [. . .]. The management was convinced that we needed US
GAAP, they felt that they could not go to market without US GAAP” (Outsider interview). In
this case, the auditors did not necessary endorse IAS, which were the carriers of the
professional logic. A US auditor may favor a financial market logic over the one endorsed
by professionals at the international level.
Coflexip’s strategy was distinguished by the willingness of management to take a
foothold in the US market (Coflexip Management Report, 1992). Therefore, a mimetic sectorial
effect had contributed to the choice of the US standards. Despite its Frenchness, the group
was a company that operated in the refining sector dominated by the USA, and therefore,
must produce accounting methods similar to those in the same sector: “In France, you had
only one company in the oil-services industry listed in Paris. In the US, there are about 150
companies in the field” (Jean-Michel Dumay, President of the flexible-pipe maker’s US
subsidiary in Houston, in Sesit, 1995).
Furthermore, the US financial analysts knew the refining sector well. The financial market
logic has been reinforced by the need to be understood by US analysts. The industry played a
key role in shaping the field. Therefore, the companies in this sector when issuing shares on
this market, used US GAAP, which was not a choice but a necessity. This resulted in
enhanced legitimacy of US GAAP by the financial analysts, who were familiar with this
particular sector: “There are sector effects, (and) the need for sectorial comparisons . . . There
are no specialist French analysts in this sector. . .in the US, we were faced with the analysts who
knew their job” (Outsider Interview). Therefore, we can see that Coflexip imitated similar
companies in its sector by adopting US GAAP. Full US GAAP adoption was more an
application of the ‘rules of the game’ rather than a voluntary choice.
AAAJ Case study 4: The switch from IAS to US GAAP by P
echiney in 1995
P
echiney’s management, who used international standards within the French framework to
prepare the consolidated financial statements, published two separate and parallel versions
of their financial statements: one in the US format and another in the French format, both of
which appeared in the 1995 annual report. It was two successive and independent decisions.
The first decision was to abandon IAS and switch to US GAAP to elaborate the second
quarter of their financial statements published in France in 1995. The second decision was to
produce two set of accounts for the yearly financial statement to comply with the French rules
as required by the COB (COB, 1995). Interestingly, net earnings were similar in US GAAP and
French rules from 1995 but the reconciliations of operating incomes indicated huge difference
only in 1995 (P
echiney Annual Report, 1995, page 104 note 1). The major change was the strict
application of the US doctrine (concerning the calculation of deferred taxes following the
acquisition of American Can), which meant that the amortization of goodwill did not appear
on a separate line (P
echiney, Annual Report, 1995).
The positioning of the company in a field dominated by a financial market logic. This choice
of US GAAP helped to restore the legitimacy of the group. Indeed, the accounting policy of
management was contested, especially in the press. The group was heavily indebted, and its
earnings were not impressive. 1994 was a year when the group elected a new chair and the
year was marked by major financial losses. Undoubtedly, it was a “Big bath accounting”
phenomenon. Indeed, if we ignore the exceptional costs because of the amortization of
goodwill related to American National Can acquisition, earnings remained constant.
Moreover, turnover was up 11% compared to 1993 (by over FF 70 billion) and operating
margin increased by 12.3%. This loss of legitimacy was likely to result in the increased cost of
financial resources. P
echiney management believed that adoption would enable them to
obtain a lower cost of capital when they had no certainty about the effects of adoption. There
existed uncertainty about the consequences of adoption of US GAAP (the first element of
mimetic isomorphism).
Another official justification was geographical to facilitate access to North American
financial markets according to the 1996 annual report (P
echiney Annual Report, 1996). Two
reasons were given to justify the choice officially: location of business activities and
comparability. “At the beginning of 1995, half of the business activities of the P
echiney Group
took place in North America [. . .] and concerning comparability, the main competitors all used
SFAS standards: Aluminum Alcoa (US GAAP), Reynolds (US GAAP), Kaiser (US GAAP),
Alcom (Canadian GAAP near US GAAP)” (Insider interview). Therefore, both arguments
were a posteriori rational, and they especially demonstrated that US GAAP corresponded to
convenient justifications. The choice of US GAAP appeared to be the “natural” choice, and
therefore, it may be considered as mimetic isomorphism because the effects were uncertain.
At the same time, it was the dominant practice as the four other French companies were
already listed on the NYSE: Total (1991), Elf Aquitaine (1991), Alcatel Alsthom (1992) and
Rh^one-Poulenc (1993), of which two were former privatized companies.
US GAAP as a constraining response to the financial market logic. The adoption of US
GAAP took place in a context of privatization that enabled a massive influx of US funds,
which demonstrated an Americanization of capital. Before privatization, the French State
held more than 80% of the voting rights, and afterwards they had less than 12%. In 1996, the
Capital Group Companies Inc. held 13.84% of the voting rights, Templeton Global Investment
9.12% and FMR Corp (a mutual funds firm) 5.72%. Finally, the remaining capital (24.6%) was
held in the form of investment certificates. These hybrid securities had priority rights to
dividends but no voting rights, the corresponding voting rights being granted to the French
State on the issue of securities.
The shares for international investments came in part from an increase in capital to offset
the capital needs of P
echiney. In addition, the shares were listed on the New York Stock
Exchange. With high capital needs, management thought they would be sanctioned by the IAS in French
US financial community if they simply provided a tabular reconciliation statement. companies in
Therefore, adoption responded to a concern for a better valuation: “The group realized that the
use of SFAS standards is a tremendous asset to this (NYSE listing), it was a credibility issue for
the 1990s
the US public [. . .] The market indicators showed that the market would value companies using
SFAS standards, hence the decision to use these standards” (Insider interview). Management
hoped that the adoption of US standards would reduce capital cost. The production of
complete financial statements was more expensive than choosing a simple reconciliation
statement. In addition, this made it difficult for management to back-pedal, and just provide a
simple reconciliation statement in the future. Debt steadily declined in absolute terms.
Therefore, debt ratio went from 1.20 in 1994 to 0.59 in 1996. Empirically, it was clear that
foreign currency debt was large and growing significantly. The debt in dollars represented
62.15% in 1992, 59.28% in 1995 and 82.36% in 1997.
The normative pressure of investment bank with a financial market logic. However, it was
not a choice since there were strong constraints (from similar companies and the SEC as
outline below), The switch from IAS to US GAAP in extenso had been recommended by
financial intermediaries (Advisory Banks): “This was not out of love for US GAAP, it was not a
light-hearted issue [. . .] at the beginning of privatization, banks, analysts and advisers did not
consider trading in New York as indispensable [. . .] a management choice and a financial
choice” (Insider interview). One might think that the normative influence had a role to play
when the company was questioning the validity of adoption. French companies seeking to
trade in New York required the use of a custodian, which was the Bank of New York for
P
echiney. Therefore, we can hypothesize that the custodian bank influenced the selection of
standards. Indeed, it was not the auditors who had a normative influence, but the bankers
responsible for issuing shares. The role of the bankers acted as a substitute for the role of the
auditors in this case.
When they decided to adopt US GAAP, management considered using only one set of
accounts in accordance with the US format. In this response, many advisers were involved,
and the choice became primarily a choice of financial policy.
The issue of US GAAP did not arise until the moment it was decided to raise funds on the
NYSE. The direct trading of shares in New York was critical to adoption.
State logic as a response to regulatory pressure from French stock exchange regulator. The
final response was the result of conflicting pressures between US and French stock market
authorities. At first, it was in response to the SEC rules, whereby P
echiney’s management
decided to produce consolidated financial statements according to the US format. Second, and
at a later date, the national market regulator (the COB) noted the incompatibility of certain
choices with French GAAP, and therefore, required management to strictly enforce the
French rules: “On October 23, The COB, a regulator, published a warning about the half year
accounts of P
echiney, aluminum and packaging group that was soon to be privatized. By
using US instead of French accounting standards, P
echiney had turned a slight loss into a
more alluring profit of FF 658 m ($130m)” (The Economist, 1995, p. 115). This resulted in the
simultaneous production of two sets of accounts.

Comparison of cases
If we compare the above cases, each company articulated the three logics (State, professional
and financial market) differently. It is possible to identify two distinct articulations of the
logics depending on the positioning of the companies, each with its own repertories of
motivations and justifications: (1) the search for meaning and an international identity based
on IAS; and (2) a focus on US GAAP when financial resources are required via investments on
the US Stock Exchange. Hence, the relative weight of each logic within the companies
AAAJ explained the heterogeneity of responses to external pressures. Our cases are emblematic of a
different degree of compatibility between logics. The professional logic, compatible with the
State one, at the time of adoption, is dominant, and the financial market logic is in the
background for A
erospatiale. Usinor adopted a response that permitted them to incorporate
the three logics with a financial market logic in the background. In the case of Coflexip, the
financial market logic dominated and was compatible with the State logic. In the case of
P
echiney, the financial market logic dominated at the time of the choice but was incompatible
with the State logic.
The A
erospatiale case differed from the other three because there was neither a share nor a
bond issue around the adoption of IAS. The catalyst for compliance to alternative standards
was an anticipation of potential financial needs. The choice of alternative standards primarily
reflected the fear of management of a loss of legitimacy vis-a-vis potential future backers,
which would have been detrimental to the raising of funds from foreign investors. Indeed,
there was no real dependence on financial backers when there was a change in accounting
policy. The financial market logic only appeared in the background and in the minds of actors
but was not enacted. Above all, the responsiveness of the chief accountant, who promoted a
professional logic and justified this by the need to participate in greater standardization,
which partly explains the move towards IAS rather than US GAAP. The choice of IAS instead
of US GAAP did not come from the external auditing firm but from the vision of the
Accounting Manager, who acted as a professional and as a corporate insider. He welcomed
IAS, which was also the standard adopted by a growing number of French companies. This
choice took place within a more general movement whereby a significant number of major
French, State-owned and non-State-owned MNCs switched to IAS. For Usinor, there was a
trade-off between the financial market logic and the professional logic. There were two
sources of financial market logic: the reconciliation with US GAAP resulted from the
comparability sought from competitors, and to a lesser extent, the switch from the French to
the US auditors. For Usinor this internationalization assumed that the audit by the US branch
of the Chicago-based firm had already certified the consolidated accounts in France. This also
occurred the year Usinor was first rated by a rating agency (it received an unsolicited rating),
evidence of financial market logic. The interpretation of institutional logic by the accounting
directors, who favored a professional logic and explicitly rejected US GAAP, explained the
choice for IAS as in the case of A
erospatial. Finally, the significant differences between
figures calculated under US GAAP explained reconciliation rather than full adoption of US
GAAP. There was incompatibility between financial market logic and State logic. The
reconciliation is a response to this incompatibility. Both companies, A
erospatiale and Usinor,
had a structural funding problem. However, the State guarantee paradoxically allowed these
companies to have very high debt ratios, which was unimaginable for any firm subject to the
normal conditions of competition for funds. Hence, financial logic was not so coercive.
The Coflexip case was totally different. The financial logics dominated and constrained
the managers of the company. Financial needs were the trigger for the move towards US
GAAP, but the accounting policy still complied with domestic rules. There was State
compatibility and a financial market logic at play. The terms of adoption were due to
conformity to peers (competitive isomorphism) and normative pressures from the US
auditors, which resulted in the unquestioning adoption of US GAAP. In the case of Coflexip,
the audit was carried out by a US national with a culture of US GAAP, who substituted the
French auditor within the French branch Ernst and Young. This adoption was facilitated by
“technical management,” who were not concerned by accounting issues, and did not resist the
financial market logic presented by the US auditor. This absence of resistance to US GAAP
was the exact opposite situation to Usinor and Pechiney.
The P
echiney case, which substituted US GAAP for IAS was the result of a pure financial
market logic, with investor pressures relayed by the investment bank in charge of the
 IAS (1989) A
erospatiale IAS-reconciliation (1991) Usinor US GAAP Coflexip (1993) US GAAP P
echiney (1996)

Heterogeneity/ No, Accounting policies Yes, Accounting policies No, accounting policies Yes, accounting policy
incompatibility consistent with IAS and inconsistent on certain points remained consistent with inconsistent with French law
the French framework with US GAAP (reconciliation) French rules (two sets of accounts)
State Logic Control of Capital by the State control State control Private control by two groups Listed company but majority
State owned by the state
State control No change Entry of Credit Lyonnais without COB against US GAAP
changing control structure
Financial Initial Public Offering on Privatization Arrival of
market logic NASDAQ and after American pension funds
EURONEXT
Evolution of debt High and increasing debt Debt ratio went from less than 1 No
after adoption to 1.3
Degree of 4 bonds issued for USD 280 m in The share of debt in dollars
internationalization of 1991 went from 60% to 80%
debt
US GAAP reconciliation for Financial Analysts Comparability companies
competitive comparability Comparability with raising funds in the US
competitors
Stock Market coercion Bonds NASDAQ Jurisdiction of SEC Jurisdiction of SEC
Professional Influence if auditors No Auditor 5 IASC Chairman Auditor 5 prescribe the US Influence of commercial
logic GAAP banks
Americanization of the
certification
Rating agencies (S&P and Rating
Moody’s)
Translation inside the Accounting Director Accounting Director favorable to Engineer which were passive No
firm favorable to IAS IAS
Institutional mimetic Yes Yes for IAS Yes with other biotech No
behavior
Mimetic behavior No
competition- dependency Accounting policy
different to Boeing
the 1990s
IAS in French
companies in

The variables for

Table 3.

all cases
AAAJ privatization. A few months later, P
echiney Management were obliged to adopt US GAAP
but the national market regulator required that the French rules be enforced. By doing so, it
reintroduced a State logic, which was incompatible with the financial market logic. The
adoption of US GAAP for Pechiney resulted in the need to raise a larger amount of funds, held
by US financial backers and not necessarily from being listed on the US stock exchange. US
GAAP, beyond reconciliation, made a company’s financial statements credible vis-a-vis the
US investors (Zuckerman, 1999). The US standards, which were stricter in terms of
information provision than the French standards, allowed management not to suffer from a
competitive disadvantage. Managers had been previously convinced that US GAAP was the
solution to their problem of under-valuation. Indeed, investment banks influenced P
echiney
management. The conversion to US GAAP resulted from the framing of external normative
influences (here investment bankers) by the company managers. In line with Chung and Luo
(2008), we show the primacy of institutional logics complements agency costs as a mechanism
explaining the choice between IAS and US GAAP. Agency cost played a catalyst role in the
minds of management and other actors (auditors, bankers); however, the choice of US GAAP
is driven by a financial market logic. All companies were in the situation where agency cost
increased, however the responses were differentiated according to the logic which prevailed.
As a conclusion, IAS applied to companies that were already highly internationalized and
facing uncertainties resulting from global competition. Hence, IAS strengthened the
corporate multinational identity. US GAAP applied to companies that received funds from
US backers or that were financing in US dollars. National rules continued being enforced
either because the logics were compatible to IAS/French compliance for A
erospatiale and
Usinor and US GAAP/French compliance for Coflexip. When the companies faced
institutional complexity, they create systems of dual compliance (reconciliation with US
GAAP for Usinor and dual reporting for P
echiney). We observed the dominance of the
financial market logic in the US Two of the case adoptions (Coflexip and P
echiney) were the
consequence of listing on US Stock Exchanges (the NYSE or the NASDAQ) and the issuing of
shares in exchange for funds, which was a pure financial market logic. Coflexip, whose capital
was closed and indirectly controlled by the State by private ownership, issued shares on the
NASDAQ in the United States with an IPO. Similarly, P
echiney, following its privatization,
found itself with 35% of its capital held by individual shareholders, 30% of which was
controlled by US pension funds. The remaining 35% was held by French institutions and the
State, which controlled 80% of the voting rights before privatization. Both switch to US
GAAP, which involved a huge change in ownership in favor of US shareholders. This
financial market logic is less visible, and not dominant in the other cases. The most recent
cases (Coflexip, Usinor and P
echiney), showed relative shares of debt denominated in dollars.
We can see a significant increase in the pressures of foreign creditors in all cases. However,
this is not as significant in the Usinor case (cf. Usinor case above).

Discussion and conclusions

Our research adds to the literature on international accounting by explaining the underlying
logics through empirical data. Our main contribution is the articulation of logics vertically
and thus, this further explicates intra-institutional heterogeneity and complexity (Meyer and
H€ollerer, 2014). The change of logic is initiated at field level but legitimized at organizational
level. The responses (modalities of adoption and degree of compliance) are shaped by the
positioning of the companies that depends of the relative strength of the pressure, relayed or
not by the carriers and the degree of freedom of management (agency). In turn, the responses
made by companies strengthen or delegitimize a logic at the institutional level. We explain
how organizations use financial reporting to deal with institutional complexity. We
demonstrate how the relative weight of agency-structure explains the prioritization of logics.
The financial market logic imposed as a constraint for the company. The professional logics IAS in French
correspond to a strategic response to institutional pressures. Our results also increase our companies in
understanding of both the compatibility and the incompatibility of logics.
Unlike Stolowy and Ding (2003), we demonstrate that the degree of opportunism of
the 1990s
managers does not depend exclusively on the flexibility of standards, but on the
embeddedness of companies within a specific field and their inherent dominant logics.
First, by providing an in-depth analysis of the incorporation of standards by companies
following an “opening” up of their capital on the foreign stock exchanges (Saudagaran and
Biddle, 1995; Raffournier, 1995), we found that French companies adopted IAS as long as they
were not required to use US GAAP by their financial backers and that accounting policy was
compliant with both IAS and US GAAP. The results highlight that the financial market logic
predominates when companies raised funds from US shareholders [4]. Today, these results have
practical applications for all companies, who have the opportunity but not the legal obligation to
adopt IFRS. While the standards are not the same nowadays, and thus, contemporary
companies do not face exactly the same choice, some companies can still make a choice between
US GAAP (rules-based standards) and IFRS (more principles-based standards). In this sense,
this paper echoes prior research on institutional research indicating that when the pressure of the
field was high, the dominant logic prevailed as exemplified by the determining role of financial
backers in P
echiney and Coflexip. First, we highlighted that the immediate need for funds
prevailed as was the case with Pechiney, where managers used IAS but abandoned them for US
GAAP (Glaum and Mandler, 2000). More specifically, we demonstrate that material resources i.e.
stock market and the associate need of funds, constrained the switch toward the financial market
logic. Secondly, in line with Zarzesky (1996), we demonstrated that localization of activities in the
US for Coflexip and P
echiney and worldwide for Usinor and A
erospatiale, positioned the
companies within different fields, namely an US and transnational field, which were subsumed
by the financial market logic and the professional logic respectively. With regard to Usinor and
A
erospatiale, this showed that opportunism was not absent from the choices made.
Second, logics may be endorsed simultaneously by several carriers outside the firm, who
are not automatically attached to one particular logic. The financial market logic influenced
companies via coercion of shareholders and influence of regulators such as the SEC. However,
the French regulator, the COB, used its coercive power to enforce the French rules, which were
carriers of State logic. US auditors, financial analysts and investment bankers favored US
GAAP as an endorsement of a financial market logic instead of IAS. Professional logics were
endorsed inside companies by accounting directors or managers, who used these as a tool to
build or indicate international identity.
Third, the use of logics permits us to characterize the importance of agency in shaping the
responses to external pressures. This echoes the work of Paches and Santos (2013), who
theorize how the degree of adherence to a logic relates to different kinds of responses
(ignorance, compliance, resistance, combination, or compartmentalization), and to situations
involving competing logics. Managers wittingly shaped their responses when facing multiple
logics. Thus, with A
erospatial and Usinor, adoption was justified by the translation of logics
by the accountants inside the firm. The adoption of IAS does not come directly from a
financial market logic – the effects of competition – but rather from the incorporation of
professional logic transmitted by those managers, who were receptive to international
standards in their companies. The managers clearly favored IAS instead of US GAAP,
because they could participate in the standardization process. Being capable of influencing
standards was important for actors, who prioritized IAS. In an interesting way, we showed
how the indifference to logics (the engineering culture at Coflexip for example) led to an
unquestioned acceptance of US GAAP, whereas these same standards were rejected by
management, who were very aware of IAS standards and their differences. This differed from
A
erospatial and Usinor, who first adhered to IAS.
AAAJ These three contributions taken together extend the literature on the role of financial
accounting in the complexification process, which so far has only dealt either with
management accounting (Conrath-Hargreaves and W€ ustemann, 2019) or with standard
settings (Matsubara et al., 2018). In the cases we studied, we encountered situations where
demands may be compatible (institutional pluralism), and situations, which could be
characterized as incompatible (institutional complexity). We show that complexity is not a
given but is built at the level of the response by the company. We contribute to research in
institutional complexity, which was conducted with the assumption that logics were
incompatible (Greenwood et al. (2011), by documenting that the compatibility is not given a
priori but is empirically defined. The position of the company is then decisive. Companies
either “accommodate” logic in a unique set of financial statement when logics appear
compatible, or they “compartmentalize” them in the sense of Kastberg and Lagstr€om (2019).
All companies were obliged to be compliant with the domestic State logic, but they did this
differently. We observe two dominant logics: namely, the financial market logic and the
professional logic, which took place in parallel to the State logic. The corporate response
depended on the compatibility or not of the different logics. Even if the compatibility
increased with the degree of flexibility of the standards, the compatibility is not inherent to
logics themselves but to each firm’s business, financial needs and accounting policy.
However, one major limitation should be noted when interpreting the findings of this
study: Are the results elaborated in a French context in the 1990s transposable to other
contexts? The rationale behind this could probably apply to State-owned and unlisted
companies in several countries, which face similar choices today. Nevertheless, we must
consider that standards have evolved enormously, and even if there are some similarities,
there are major differences among the institutional frameworks. Hence, criteria and
conditions for comparability will have to be clarified, and this provides a perspective for
future research applied to specific contemporary cases.

Notes
1. American Depository Receipts (henceforth, ADR) were certificates issued by US Banks, which
enabled investors to buy shares in foreign companies. These ADR were traded over the counter. The
disclosure constraints were weak. The issuer may use financial statements published on the primary
market (ADR Level 1), When the ADR are listed on the US market (ADR Level 2) or when the issuing
companies raise capital (ADR level 3), the foreign companies are required to provide complete
information and reconciliation in compliance with 20 – F.
2. Usinor LIBOR 6 months 50 MUSD; 1991 Usinor LIBOR 6 months 44.3 MUSD; 1991 Usinor LIBOR
6 months 41 MUSD; 1991 Usinor LIBOR 3 months 145 MUSD; 1992 Usinor LIBOR 3 months 31
MUSD; 1992 Usinor LIBOR 3 months 31.4 MUSD.
3. APDC created in 1947, is the professional organizational, whose members are the accounting
directors of biggest French companies, especially CAC 40 companies. It is an association which
responds to IASC exposure drafts.
4. It’s not just about listing existing securities but creating new securities in exchange for money. There
was therefore not only a regulatory constraint but also a financial constraint.

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About the authors

Philippe Touron is a full Professor at Universit
e Paris 1 Panth
eon-Sorbonne. His primary teaching and
research area revolves around international accounting. His main research interest focuses on IFRS. He
has also published in the area of audit, which is one of his main research interests. Philippe Touron is the
corresponding author and can be contacted at: Philippe.touron@univ-paris1.fr
Peter Daly is Professor of Managerial Communication, Head of Business Communication and
Language Studies and Director of the MSc in Management Studies at EDHEC Business School, France.
Prof. Daly teaches business and managerial communication, teambuilding, recruitment and assessment
preparation, sensemaking within leadership with the Chair of Leadership and Managerial
Competencies. He holds a BA in Modern Languages (French, German, Spanish and English) from
DCU, Dublin, Ireland; an MA in Applied Linguistics and Communication from UCC, Cork, Ireland and a
PGCE in Online Education from the University of London. His doctoral research in Higher Education at
Sheffield University analyzed the social, institutional and self-discourses of business apprenticeship. His
current research revolves around managerial and learning discourse, business apprenticeship, teaching
and learning pedagogy and creativity.

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