Small CPA firm product differentiation in the small business market

This study investigates the product differentiation factors that major referees use in referring CPA's to small business. Two methodological approaches are developed. The first is a systematic method of cue determination. The second examines the convergence of different judgments to test the external validity of single-system lens model results. The results show that the referees most value good working relationships and technical competence.     

Hardening soft accounting information: Games for planning organizational change

This study provides theory and field evidence on the social process of hardening soft accounting information to make it persuasive for planning organizational change. Accounting information intended to support organizational change is often soft, that is, there is lack of interpersonal agreement about its quality. For example, employees can lack agreement about the quality of accounting information (e.g., activity-based costing) because the information is constructed from subjective information obtained from interviews and surveys. This information can contain unintentional errors as well as intentional distortions that are intended to avoid revealing embarrassing inefficiencies and/or to resist painful organizational change. We use concepts from applied game theory and social psychology to identify from the accounting literature four multi-person games that may be played to harden soft accounting information. These hardening games are characterized in terms of payoffs, players, the comparability of soft accounting information, and the rules of the games that are expected to emerge. We interpret the field evidence as indicating that the hardening games that emerge depend on who the players are and the comparability of their soft accounting information. In addition, we provide evidence on how the rules of the games that harden the information emerge from the players’ social interactions. Finally, we provide evidence on how an organization learns by trial-and-error how to harden soft accounting information by changing the players and the comparability of the soft accounting information.     

Expectations Formation and Business Cycle Fluctuations: An Empirical Analysis of Actual and Expected Output in UK Manufacturing, 1975–1996

Direct measures of expectations, derived from survey data, are used in a Vector Autoregressive (VAR) model of actual and expected output in eight industries in the UK manufacturing sector. No evidence is found with which to reject rationality in the derived expectations series when measurement error is appropriately taken into account. The VAR analysis illustrates the importance of intersectoral interactions and business confidence in explaining the time profile of industrial outputs, examines the mechanisms by which shocks are propagated across sectors and over time and investigates the relative importance of sectoral and aggregate shocks of different types.     

Auditor changes,information quality and bankruptcy prediction

In periods of financial distress management may attempt to suppress unfavorable information from creditors and investors through the use of undisclosed changes in accounting methods, estimates and procedures, thus reducing the quality of the information contained in the firm's financial statements. The auditor's role in this context is to ensure that such compromise does not take place. If the auditor does not permit such accounting treatments, the company may choose to switch to another auditor who will. Empirical evidence relating auditor-change behavior to the quality of comparative bankruptcy prediction models provides support for the notion that auditor changes before bankruptcy may be at least partially due to lack of success at suppressing unfavorable information with the current auditor. Conversely, non-auditor switching companies appear to enjoy greater success at suppressing negative income and leverage information.     

Effects of organizational process change on responsibility accounting and managers’ revelations of private knowledge

We report the results of a nine-year field study that examines how responsibility accounting (RA) is used to manage horizontal relationships among several responsibility center (RC) managers including those who work on committees or cross-functional teams. We find theory-consistent evidence that the goal-congruent design or redesign of accounting and participation practices in general, and of RA in particular, depends on the magnitude, scope, and speed of organizational process change. When there is a change in the magnitude, scope, and speed of organizational process change, we find that the measurability of RC managers’ financial performance can change, and we also find that using RA to manage RC boundaries is an important mechanism for achieving goal-congruent behavior and avoiding dysfunctional behavior. Moreover, we show that several accounting and participation practices (e.g., activity-based costing, open book accounting, project budgeting, cross-functional teams) support RC boundary management that involves framing or reframing RC boundaries so as to influence competitive or cooperative behavior among RC managers. Finally, this study contributes by introducing a new research method to the accounting literature that is effective in structuring and interpreting longitudinal field data in relation to theoretical expectations.     

The landlocked island: Information access and communications policy in Nepal

This paper examines information access in Nepal, its current limitations, and opportunities for expansion, particularly in rural areas. It argues that government policies and the regulatory environment have failed to create the competition necessary for rapid expansion of information access through information and communication technologies (ICTs), particularly in rural areas. Furthermore, restrictive approaches to licensing and exorbitant fees have hindered the ability of civil society organizations, non-governmental organizations (NGOs), and small and medium enterprises (SMEs) to provide information access at the local level. This has resulted in very limited access to information outside a few urban centers and created some of the world's highest access costs in one of its poorest countries. To successfully address this situation, the newly installed republican government will need to create an environment that promotes competition in less lucrative rural markets while negotiating the demands of existing license holders.     

Too Good to be True: Board Structural Independence as a Moderator of CEO Pay‐for‐Firm‐Performance

Whether voluntary or mandatory in nature, most recent corporate governance codes of best practice assume that board structural independence, and the application by boards of outcome‐based incentive plans, are important boundary conditions for the enforcement of Chief Executive Officer (CEO) pay‐for‐firm‐performance; that is, for optimal contracting between owners and executive agents. We test this logic on a large Australian sample using a system Generalized Method of Moments (GMM) approach to dynamic panel data estimation. We find that Australian boards exhibiting best practice structural arrangements – those chaired by non‐executives and dominated by non‐executive directors at the full board and compensation committee levels – are no more adept at enforcing CEO pay‐for‐firm‐performance than are executive‐dominated boards. These findings suggest that policy makers' faith in incentive plans and the moderating influence of structural independence per se may be misplaced. Our findings also hold significant implications for corporate governance theory. Specifically, the findings lend further support to a contingency‐based understanding of board composition, reward choice and monitoring; an approach integrating the insights afforded by behavioural approaches to Agency Theory and by social‐cognitive and institutional understandings of director outlook, decision‐making and behaviour.     

'Lead Bonus Happy': Profit-Sharing, Productivity and Industrial Relations in the Broken Hill Mining Industry, 1925–83

Economic and labour historians have thus far shown little interest in analysing the operation and impact of variable, performance-based payment systems in Australia. This is particularly so of collective forms of performance-based remuneration such as profit-sharing. This article assesses the operation and impact of Australia's oldest continuous profit-sharing scheme, the Broken Hill 'lead bonus'. Outcomes are assessed against three broad sets of management objectives: economic, cultural/ideological, and industrial. The study argues that whilst the bonus effectively cushioned company labour costs during periods of depressed market demand and metal prices, outcomes at a microeconomic level were negative. Prior to the advent of sustained high inflation, high bonus earnings served to negate the productive potential of the industry's system of small-group payment by results. Productivity growth emanated mainly from management-driven changes in mining techniques and technology, the intensity of which was related inversely to the lead price and, hence, bonus payments. The study concludes that management's continued adherence to the bonus system was motivated less by microeconomic or cultural/ideological considerations than by its perceived value as a counter to major industrial disruption.     

Parallel machine replacement under horizon uncertainty

Construction projects usually get delayed for several time periods. When the planning horizon of a project is extended, projections for purchase and salvage of machinery within the planning horizon become inaccurate and less beneficial and often lead to unexpected costs. In this article, we formulate a parallel machine replacement (PMR) problem as a two-stage stochastic program with an uncertain planning horizon. We consider renting as an alternative to purchasing and maintaining the machinery. We show the application of the model through a case study in construction projects. Through numerical analysis, we derive managerial implications and show the value of the stochastic model.