This paper critically reviews the literature seeking to establish evidence for a
positive accounting theory of corporate social disclosures. Following Reiter (1998),
the paper provides detailed evidence and an illustration of how positive accounting
theorists’ attempts to colonize social and environmental accounting research have
proved a failure. The paper carefully traces through the original work of Watts
and Zimmerman (1978) showing their concern with the lobbying behaviour of
large US oil companies during the 1970s. Such companies were argued to be
abusing monopolists and likely targets of self-interested politicians pursuing wealth
transfers in the form of taxes, regulations and other “political costs”. Watts and
Zimmerman’s reference to “social responsibility” is shown to be a passing remark,
and most likely refers to “advocacy advertising”, a widespread practice amongst
large US oil companies at that time. Subsequent literature that relies on Watts
and Zimmerman to present a case for social disclosures is shown to extend their
original arguments. In the process, concern over the “high profits” of companies is
shown to diminish, and the notion of political costs is so broadened that it blurs with
other social theories of disclosure. Consequently, the positive-accounting-based
social disclosures literature fails to provide distinct arguments for self-interested
managers’ wealth maximizing. This paper also shows that the empirical evidence
gathered to date in support of a positive accounting theory of social disclosures
largely fails in its endeavour.