Rethinking the use of causal theories in social sciences: a focus on accounting and finance

Abstract

This study highlights the problems associated with the use of deterministic models in social scientific disciplines such as accounting and finance. A deterministic theory connotes a self-defining set of physical relations and it yields a set of mathematical functions, parameterized by time, which describes how a set of ideal measure numbers changes with the time parameter while statistical models are used to describe the distribution of variations of concrete measured data from the ideal mathematical law. In this study, it is argued that in disciplines such as accounting and finance there are no appropriately defined ideal mathematical laws. Moreover, it is suggested that phenomena in accounting and finance do not exhibit characteristics that facilitate an appropriate description of deterministic models. If this is the case, it follows that there are no concretely measurable data in these disciplines and consequently these data have variations whose distributions from undefined ideal mathematical laws cannot be described. Hence, it is suggested in this study that linear models can only yield misleading information in accounting and finance unless they are based on concretely measurable relations.