Accounting education literature review (1991–1997), part II: students,educational technology,assessment and faculty issues

This paper updates literature reviews by Rebele et al. (1991)and Rebele and Tiller (1986)by reviewing a subset of the accounting education literature published during the period 1991–1997. In a preceding paper (Part I), Rebele et al. (1998)reviewed accounting education articles related to two topics: curriculum and instructional approaches. In this paper (Part II), we review articles related to the topics of students, educational technology, assessment and faculty issues, published primarily in the following five journals: Journal of Accounting Education, Issues in Accounting Education, The Accounting Educators' Journal, Accounting Education: A Journal of Theory, Practice and Research and Accounting Perspectives. Recommendations for future research are offered at the end of each major section. An appendix identifies instructional cases and educational resources published in accounting education journals during the 1991–1997 period.     

Globalization and the state–profession relationship: the case the Bank of Credit and Commerce International

Globalization of businesses raises major questions about the regulation of corporations, both in the national and international context. The debate is marked by two competing views. The ‘hyperglobalists’ claim that in a globalized world, nation-states cannot take effective actions to regulate multinational businesses, especially those relating to banking and finance. In response, the ‘skeptics’ accept the view that to regulate corporations, the nation-state has always had to restructure itself. However, they challenge the contention that globalization has reduced the power, functions and authority of the state. The paper contributes to the debate through an examination of some of the processes leading to the forced closure (and the aftermath) of the Bank of Credit and Commerce International (BCCI), a bank that operated from 73 countries. It particularly focuses upon the role of the banking regulators and their reliance upon auditing technologies to regulate major banks. The paper sides with the ‘skeptics’ and argues that the nation states, especially major Western states, remain important players in the regulation of global businesses. It concludes that the nation-state’s capacity to regulate global enterprises is compromised by history, domestic concerns and relationships with class and capitalist interests rather than by globalization per se.     

International linkages and macroeconomic news effects on interest rate volatility — Australia and the US

We examine international linkages between daily time series of US and Australian 3-month treasury bills and 10-year government bonds from 1987–1995, paying particular attention to the effects of macroeconomic announcements in both countries. The two countries' interest rate data are modeled by a bivariate exponential generalized autoregressive conditional heteroscedasticity (EGARCH) formulation. The results suggest that market participants believed the Reserve Bank of Australia targeted the consumer price index (CPI), while the Federal Reserve targeted economic activity. Monetary policy announcements had significant effects on interest rates, as well as on their volatility in the short term. US macroeconomic activity announcements significantly moved Australian interest rates, particularly at the short end. Australian interest rates moved significantly in response to the previous day's US interest rate shocks. The conditional volatility of the Australian interest rate changes was also significantly influenced by lagged US interest rate shocks, as well as by surprises in US macroeconomic announcements. Some macroeconomic news announcements raised conditional volatilities, while others reduced them. Overall, there was a remarkable and complex array of linkages between the two countries.     

International income risk-sharing and the global financial crisis of 2008–2009

We examine the impact of the global financial crisis on the degree of international income and consumption risk-sharing among industrial economies using returns on cross-border portfolio holdings (e.g., debt, equity, FDI). We split the returns from the net foreign holdings as receipts (inflows) and payments (outflows) to investigate which of the two sides exhibited the greater resilience for income risk-sharing during the recent crisis. First, we find that debt delivered better risk-sharing than equity, mainly reflecting the deficit deterioration in EMU countries during the post-crisis period. FDI, by contrast, did not correspond to noticeable risk diversification. Second, separating output shocks into positive and negative components reveals that debt holding receipts (equity liability payments) performed better under negative (positive) realizations of the shock variable. Third, the unwinding of capital flows resulted in a sharp fall in income dis-smoothing via the debt liability channel in the new EU countries.     

Will architecture win the technology wars?

Success today flows to the company that establishes proprietary architectural control over a broad, fast-moving, competitive space, Charles R. Morris and Charles H. Ferguson claim in "How Architecture Wins Technology Wars" (March-April 1993). No single vendor can keep pace with the outpouring of cheap, powerful, mass-produced components, so customers have been stitching together their own local systems solutions. Architectures impose order on the system and make interconnections possible. An architectural controller has power over the standard by which the entire information package is assembled. Because of the popularity of Microsoft's Windows, for example, companies like Lotus must conform their software to its parameters to be able to compete for market share. Proprietary architectural control has broader implications for organizational structure too: architectural competition is giving rise to a new form of business organization.     

On the convergence of management accounting and financial accounting – the role of information technology in accounting change

In this article we theorize and conceptualize the recent convergence of management accounting (MA) and financial accounting (FA) with the advancements in information technology (IT), and explicate not only how this convergence is manifested in the technical and technological domain, but also how it is reflected in their convergence at the behavioral and organizational level.Drawing on the analytical model by Hemmer and Labro (2008), in which the forward-looking perspective of FA leads to forward-looking MA, we build a conceptual framing to analyze this convergence. According to this framing, information technology (IT) serves as a facilitator, catalyst, motivator, or even an enabler for the convergence of MA and FA. We further argue that convergence is a much broader phenomenon than claimed by Hemmer and Labro. It firstly covers the technical and technological domain, including the intentional integration of information systems and software, as well as the intentional combination of methods or standards, extending thereafter to the behavioral and organizational domain with the (un)intentional alignment regarding both functions and processes as well as the (un)intentional convergence regarding both work and roles. The applicability of this conceptual framing is illustrated with a set of examples.We present illustrations of the manifestations and outcomes of convergence in both the technical and technological domain (related to accounting standards, discretionary reporting, performance measurement, transfer pricing, competitor, customer and contractor analysis, due diligence in M&As), and the behavioral and organizational manifestation domain (related to accounting processes, work and the role of accountants, incentive systems, accounting and control in multinational companies, the control of business networks, the board of directors and venture capitalists). Based on our observations, we conclude that the forward-looking FA elements are often intertwined with MA, and vice versa, and that convergence in the technical and technological domain appears to precede convergence in the behavioral and organizational domain. In most of our observations, IT plays an important or even crucial role in this convergence process. In the light of these convergence observations, we open several avenues for further research.     

SME financing and the choice of lending technology in Italy: Complementarity or substitutability?

This paper investigates SME financing in Italy. The literature distinguishes between two main different lending technologies (LTs) for SMEs: transactional and relationship LTs. We find that banks lend to SMEs by using both LTs together, independently of the size and proximity of borrowers. Moreover, we show that the use of soft information decreases the probability of firms being credit rationed. Finally, we find that more soft information is produced when the bank uses relationship LT as primary technology individually or coupled with transactional LT. Our results support the view that LTs can be complementary, but reject the hypothesis that substitutability among LTs is somehow possible for outsiders by means of hardening of soft information.     

The Basle Accord of 1988 and the International Credit Crunch of 1989–1992

The 1989–1992 credit crunch is investigated by studying changes in balance-sheet accounts and the systematic risk of banks from five countries. Banks in Canada, the United Kingdom, and the United States experienced an asset reallocation from loans to securities and an increase in systematic risk. Out of four hypotheses studied, only the higher regulatory scrutiny hypothesis is supported in all three countries, although each hypothesis is supported in at least one country. Additional findings are that the Basle Accord may have given Canadian, British, and German banks a competitive advantage over U.S. banks; it may have failed to reduce the risk of international banks; and, for U.S. banks, no straightforward relationship is found between attaining balance-sheet target ratios and reducing bank systematic risk.     

Determinants of stakeholders’ attitudes towards a new technology: nanotechnology applications for food,water, energy and medicine

Stakeholder risk and benefit perceptions and attitudes towards a technology matter for the societal response to these technologies. This is especially the case for technological innovations where the public has no direct experience with the technology and its applications. In such cases, expert views are the main source for public opinion formation. Stakeholder risk and benefit perception, and their effect on attitudes towards a new technology (nanotechnology) and its applications were examined in two studies. In a survey, the effect of risk and benefit perception on attitudes to nanotechnology in specific application domains (energy, water, food and medicine) was examined. While risk and benefit perception predicted much of the variance in attitude, experts were more positive about medicine applications and more negative about food applications than could be explained through risk and benefit perception. In the second study, expert focus groups were asked for reasons why food and medicine were seen as more negative and positive than based on the risk and benefit perceptions as measured in the survey. For medicine, the urgency and unique potential of nanotechnology was seen as a reason as why this domain was liked more. For food, the high level of uncertainty about risk assessment and about exposure of consumers and the lack of urgency in applying nanotechnology to food was seen as a reason this domain was liked less. In addition, experts voiced concern about potential negative public response to food applications as reasons for their negative attitude. These results thus suggest that both risk and benefit perception consist of multiple dimensions that require further exploration.     

Housing, consumption and monetary policy: How different are the US and the euro area?

This paper provides a systematic empirical analysis of the role of the housing market in the macroeconomy in the US and the euro area. First, it establishes some stylised facts concerning key variables in the housing market on the two sides of the Atlantic, such as real house prices, residential investment and mortgage debt. It then presents evidence from Structural Vector Autoregressions (SVAR) by focusing on the effects of monetary policy, credit supply and housing demand shocks on the housing market and the broader economy. The analysis shows that similarities outweigh differences as far as the housing market is concerned. The empirical evidence suggests a stronger role for housing in the transmission of monetary policy shocks in the US. The evidence is less clear-cut for housing demand shocks. Finally, credit supply shocks seem to matter more in the euro area.     

Ecological risk assessment of pesticides in the EU: what factors and groups influence policy changes?

For the last couple of years, European environmental risk assessment (ERA) regulations have undergone significant changes. The new 1107/2009 directive which came into effect in 2011 has triggered an on-going debate on defining specific protection goals for ERA. During this period, we conducted a study on policy change among the most influential ERA stakeholders from Europe. We interviewed 43, purposively sampled, participants from the European safety authorities, plant protection product industry and academia. Transcribed interviews underwent thematic analysis conducted separately by two coders. As we followed the advocacy coalition framework, our findings focus on stakeholders’ processes, interrelations and values behind the ERA policy change. The main challenges emerging from our analysis turned out to be the slow uptake of scientific developments into ERA and very broadly defined protection goals. The use of safety factors and cut-off criteria left risk assessors with many uncertainties. With ERA in its current form it turned out to be impossible to determine whether the current scheme is over- or under-protective. Still, the study shows that the problem of over- or under-protectiveness lies deep in the perception of stakeholders and depends greatly on their priorities. Academics strive for better ecological relevance as a priority. They have concerns that ERA is oversimplified. Regulators worry that ERA relies too much on risk mitigation and is possibly not protective enough, but at the same time, the majority believes that the assessment is well established and straightforward to follow. Industry representatives would like to see ERA based more on probabilistic risk assessment. Recent changes, according to risk assessment and management practitioners have led to an inevitable increase in complexity, which is not perceived as a positive thing, and does not necessarily translate into better risk assessment.     

Have the GIPSI settled down? Breaks and multivariate stochastic volatility models for,and not against,the European financial integration

We investigate the integration of the European peripheral financial markets with Germany, France, and the UK using a combination of tests for structural breaks and return correlations derived from several multivariate stochastic volatility models. Our findings suggest that financial integration intensified in anticipation of the Euro, further strengthened by the EMU inception, and amplified in response to the 2007/2008 financial crisis. Hence, no evidence is found of decoupling of the equity markets in more troubled European countries from the core. Interestingly, the UK, despite staying outside the EMU, is not worse integrated with the GIPSI than Germany or France.     

Predicting premiums for the market, size, value, and momentum factors

This paper investigates the out-of-sample predictability of monthly market as well as size, value, and momentum premiums. We use a sample from each of the US and the Swiss stock markets between 1989 and 2007. Using the Swiss sample provides an important new perspective as the repeated evaluation of the same (US) data set leads to data mining problems. To avoid data mining in our predictability study, we test both statistical significance and robustness in the two samples. Our key results are as follows. We find no robust indication that the market premium is predictable, which is also true for the momentum and value premiums. It cannot be excluded that the results from the US may be caused by data mining in light of the results from the Swiss sample. However, the size premium seems to be somewhat predictable, due to the credit spread. We theorize that there are three possible reasons for this rare evidence for predictability. First, predictability may have disappeared over the last decade, as academic research made the respective information public. Second, predictability seems, as we demonstrate, not to be robust to the choice of methodology. Third, robustness tests in the Swiss sample reveal that many of the supposedly statistically significant interrelations from the US sample may be attributed to randomness, which, in that case, would be data mining. Therefore, we think that future discussions of predictability should address the issue of data mining by applying robustness tests.

Should we Fear the Shadow? House Prices,Shadow Inventory,and the Nascent Housing Recovery

Although a broad-based increase in house prices has been observed over the past year, not everyone is convinced the rise of house prices will persist and lead to a steady recovery of the economy. The main reason for this skepticism is uncertainty about the “shadow inventory”: foreclosed homes held by investors or as REOs, which have not yet hit the market but likely will as market prices rise. The volume of shadow inventory itself in local markets is largely unknown, as is its impact on the housing market. This study quantifies the size of the shadow inventory and investigates the spatial impact of the out-flow of shadow inventory. The scope of our study is a set of housing markets (AZ, CA, and FL) that vary in both their historic housing price volatility as well as institutional factors - such as foreclosure law statutes - that may influence the relationship between the shadow inventory and house price dynamics. To address the endogeneity that characterizes the spatial interaction of house prices and the out-flow of the shadow inventory, we utilize a simultaneous equation system of spatial autoregressions (SESSAR). The model is estimated using measures of the shadow inventory derived from DataQuick’s national transaction history database and county-level house price indices provided by Black Knight. Lastly, because our estimate - as well as all other existing estimates - of the shadow inventory relies upon string matching algorithms to identify entry into and exit out of REO status, we validate the accuracy of our measures of REOs using loss mitigation data from the OCC Mortgage Metrics database.     

Summary of “outcomes assessment”: American Accounting Association Teaching and Curriculum Section outcomes assessment committee

A number of state legislatures, or their boards of higher education, along with the major academic accrediting agencies are now requiring institutions of higher education to include outcomes assessments in their evaluation process. Because of the significant impact this will have on all accounting programs, the Teaching and Curriculum Section of the AAA established a committee to examine the issues of outcomes assessment, and to provide an overview on the expected continued developments of this recent advance. Outcomes assessment focuses on the outcomes of the educational process, rather than on the inputs or on the learning environment. These outcomes are student-based, and may include behavioral, affective, and cognitive characteristics. Many institutions are struggling with attempting to find measurement devices that reflect their programs' objectives. Some universities have developed their own instruments, while others are using commercially available instruments. This report presents an overview of the Committee's work, and stresses the key role that faculty must play in the continuing development of outcomes assessment.¹     

Exports,foreign direct investment,and the costs of corporate taxation

This paper develops a model of a monopolistically competitive industry with extensive and intensive investment and shows how these margins respond to changes in average and marginal corporate tax rates. Intensive investment refers to the size of a firm’s capital stock. Extensive investment refers to the firm’s production location and reflects the trade-off between exports and foreign direct investment as alternative modes of foreign market access. The paper derives comparative static effects of the corporate tax and shows how the cost of public funds depends on the measures of effective marginal and average tax rates and on the elasticities of extensive and intensive investment. The paper was presented in 2006 at the German public finance meeting in Giessen; the Institute for Advanced Studies in Vienna; the ESF/CEPR Workshop on Outsourcing, Migration and the European Economy in Rome; the University of St. Gallen; the Graduate Institute for International Studies in Geneva, and in 2007 at the International Monetary Fund in Washington, DC, the CESifo Area Conference in Public Sector Economics in Munich and the 63rd IIPF Congress in Warwick. I appreciate stimulating comments by Michael Devereux and seminar participants and, in particular, by the discussants Andreas Haufler and Nadine Riedl, an anonymous referee and the editor Richard Cornes.     

Does the Management's Forecast of Merger Synergies Explain the Premium Paid,the Method of Payment,and Merger Motives?

I study a sample of 336 mergers and acquisitions (M&A) deals to investigate the effect of managements’ estimate of synergy on the reservation price and the payment method. I find that synergy does not explain the premium paid implying that it may have been announced to induce shareholders to endorse the deal. Acquiring firms are more likely to overpay if they have low growth potential, while the target firm is large, has higher premerger operating performance, and high growth potential. Acquirers may be serving their own self‐interests as they are more likely to exceed their reservation price if they receive low compensation and if entrenchment provisions are in place. I also find that these acquisitions lead to postmerger shareholders’ wealth destruction, which is more pronounced when acquirers overpay. I document that the greater the synergy and the acquirer firm‐specific overvaluation, the higher the likelihood of settling the deal with more shares.     

Corruption and the shadow economy: like oil and vinegar, like water and fire?

From a theoretical point of view, the relationship between corruption and the shadow economy is ambiguous: They can either be substitutes or complements. This paper contributes to this debate by using a structural equation model with two latent variables to extract information on various dimensions of corruption and the shadow economy. Analyzing a sample of 51 countries around the world over the period 2000 to 2005, we present empirical evidence for a complementary (positive) relationship of corruption and the shadow economy.     

International Stock Return Predictability: What Is the Role of the United States?

We investigate lead‐lag relationships among monthly country stock returns and identify a leading role for the United States: lagged U.S. returns significantly predict returns in numerous non‐U.S. industrialized countries, while lagged non‐U.S. returns display limited predictive ability with respect to U.S. returns. We estimate a news‐diffusion model, and the results indicate that return shocks arising in the United States are only fully reflected in equity prices outside of the United States with a lag, consistent with a gradual information diffusion explanation of the predictive power of lagged U.S. returns.