How, by whom, and why would a regulator be captured, according to the capture theory?
Ans.
According to the capture theory, while regulation may be adopted in the public interest at first, the
regulatory mechanisms are frequently captured by those who are regulated. The regulated parties want
to document the regulatory process so that they can take steps to ensure that any future regulations do
not harm them. Walker (1987), who gave proof that the Australian accounting profession was able to
capture the government-controlled accounting standard setter (at the time, the standard-setter was
known as the Accounting Standards Review Board), was mentioned in this chapter. There has been
historical evidence of similar regulatory organizations being controlled by vested industrial interests in a
variety of industries.