The rise of defensive engineering: how personal liability considerations impact decision-making

Abstract

Based on a survey of Australian engineers (n = 275) this paper examines the impact of personal liability considerations on engineering decision-making. Almost all respondents who make high-stakes decisions saw questions of liability as having both positive (90%) and negative (87%) impacts. Our analysis shows that awareness of personal liability acts to focus the attention of many engineers on the moral dimension of their work. However, it also encourages more expensive decision-making, inhibition of innovation and professional paralysis. We argue that while personal legal liability is a legitimate way to focus engineers’ attention on the potential impact of their work, a problem arises when decision-makers are held responsible for disasters over which they had little control. The focus then shifts to ‘defensive engineering’ practices that are aimed at limiting individual liability rather than disaster prevention. Legal processes that are seen to unfairly allocate blame do not encourage practices that support future disaster prevention.     

Community social capital and individual disaster preparedness in immigrants and Canadian-born individuals: an ecological perspective

Abstract

Psychological research on the predictors of disaster preparedness has mainly focused on individual-level factors, although the social environment plays an important role. Our goal is to provide a systemic perspective to help improve risk communication and risk management for natural disaster risks. We examined how community-level social capital related to individual-level disaster preparedness in immigrants compared with Canadian-born individuals. We characterised participants’ communities’ social capital by conceptually linking two national surveys using postal codes. We performed sequential linear multiple regression analysis to examine the relationship between community social capital and individual disaster preparedness. Results revealed three components of social capital: societal trust, interaction with friends, and neighbourhood contact. Societal trust positively predicted the extent to which immigrants and Canadian-born individuals knew someone who would search for them post-disaster. Interestingly, results revealed that Canadian-born individuals were more likely to uptake emergency planning when living in a community with strong societal trust, while the reverse was true for immigrants. Results suggest that some components of social capital may have an effect on certain preparedness behaviours. Societal trust could have both positive and negative effects on emergency planning depending on individuals’ immigrant status. Risk communication and risk management should consider social capital as part of the framework for effective disaster preparedness.     

Participant‐focused analysis: explanatory power of the classic psychometric paradigm in risk perception

Typical psychometric paradigm factors appear to have greater explanatory power for individual participants than previously envisaged. It is possible to acquire interpretable information about single participants using two factors (catastrophic potential and social and personal exposure) from aggregated participant‐focused data. Our results suggest that the classical psychometric model originated by Fischhoff and Slovic in the early 1980s to explain differences among hazards may also be capable of accounting for differences among participants. While socio‐demographic conditions on their own do not have substantial explanatory power, they are statistically significant and appear to dictate the position of participants within the factor space obtained using a participant‐focused analysis. One of the principal criticisms of the psychometric paradigm has been its lack of interpretability when using disaggregated data, but incorporating socio‐demographic variables overcomes this limitation.     

Councillor ethics: a review of the Committee on Standards In Public Life’s ‘Local Government Ethical Standards’

ABSTRACT

The Committee on Standards in Public Life’s (CSPL) 2019 report Local Government Ethical Standards presents a detailed review of local government ethics in England, aiming to highlight both best practice and areas for improvement. In so doing, it makes 26 recommendations ranging in importance. Likely to be one of the most important, and most controversial, is a recommendation to allow local authorities to suspend democratically-elected councillors for up to six months. This paper presents a review of the report and its recommendations, with a particular emphasis on the ‘values-versus-compliance’ distinction in ethical regulation.     

A new theoretical framework to assess Multinational Corporations’ motivation for Foreign Direct Investment: A case study on Vietnamese service industries

PurposeThis paper develops a new theoretical framework, based on eclectic paradigm and institution theory, to evaluate Multinational Corporations’ (MNCs’) incentives for Foreign Direct Investment (FDI). The new framework is applied as a case study in the service sector across Vietnam.Design/methodology/approachThis study applies the Structural Equation Modelling (SEM) approach to investigate the motivational factors of MNCs by using primary data on MNCs working in service industries in Vietnam. This paper introduces five motivational factors, and conducts a Confirmatory Factor Analysis (CFA) to study the construct validity of the research measures and to cluster the variables into common factors that can be used to present relationships among sets of interrelated variables.FindingsThe SEM results reveal that the key determinants of MNCs’ incentives to invest in service industries are market-seeking government policies and culture, all of which have significantly contributed to FDI.Originality/valueThis study offers new knowledge and insights into the factors that motivate FDI by MNCs in general and in service industries in Vietnam. The findings are plausible and in line with the recent economic reforms launched in Vietnam, along with the increased FDI inflows into the country in the last twenty-five years.     

The impact of specific information provision on base station siting preferences

When it comes to the new siting of a mobile communication base station in one’s neighbourhood, some people react with rejection because they fear health consequences from the emitted high‐frequency radiation. Most people would prefer to site base stations outside residential areas, but from a public health perspective, this may result in even more radiation for the phoning population. Therefore, authorities are interested in improving the current base station siting processes. The question arises whether specific knowledge enhancement would influence base station siting preferences or whether affective or emotional components (due to the scientific uncertainties involved) would overrule the influence of such attempts. To answer this question, an experimental study with a convenience sample of Swiss citizens (N = 228) was conducted. Participants were confronted with one of three texts: a neutral text (control group), an information booklet about mobile communication and an emotionally charged newspaper article that reported a conflict about the siting of a new base station. After reading the text, participants filled out a questionnaire about their perception of mobile communication and their base station siting preferences. Reading the information booklet increased participants’ knowledge and led to some perceptual changes of base stations and mobile phones. Importantly, participants reading the booklet were able to transfer their knowledge to a base station siting task and found locations that would emit less radiation for the phoning population. Implications and limitations of these results are discussed.     

Extending the Classification of European Countries by their IFRS Practices: A Research Note

Abstract

This paper expands the IFRS accounting systems’ classification proposed by Nobes [(2011). IFRS practices and the persistence of accounting system classification. Abacus, 47(3), 267–283] to a broader set of European countries. The results suggest a classification distinguishing between four groups of European countries, and add to the evidence, reported by Kvaal and Nobes [(2010). International differences in IFRS policy choice. Accounting and Business Research, 40(2), 173–187] and Nobes (2011)., that pre-IFRS accounting differences influence the options adopted by firms. This study contributes to the literature suggesting that the widespread adoption of IFRS has not eliminated the differences between national accounting practices and that accounting systems classification did not lose its relevance.     

“Relative Importance of Risk Sources in Insurance Systems”, Edward W. Frees,April 1998

Abstract

This paper considers a Sparre Andersen collective risk model in which the distribution of the interclaim time is that of a sum of n independent exponential random variables; thus, the Erlang(n) model is a special case. The analysis is focused on the function φ(u), the expected discounted penalty at ruin, with u being the initial surplus. The penalty may depend on the deficit at ruin and possibly also on the surplus immediately before ruin. It is shown that the function φ(u) satisfies a certain integro-differential equation and that this equation can be solved in terms of Laplace transforms, extending a result found in Lin (2003). As a consequence, a closed-form expression is obtained for the discounted joint probability density of the deficit at ruin and the surplus just before ruin, if the initial surplus is zero. For this formula and other results, the roots of Lundberg’s fundamental equation in the right half of the complex plane play a central role. Also, it is shown that φ(u) satisfies Li’s (2003) renewal equation. Under the assumption that the penalty depends only on the deficit at ruin and that the individual claim amount density is a combination of exponential densities, a closed-form expression for φ(u) is derived. In this context, known results of the Cauchy matrix are useful. Surprisingly, certain results are best expressed in terms of divided differences, a topic deleted from the actuarial examinations at the end of last century.     

Academic Performance in Introductory Accounting: Do Learning Styles Matter?

Abstract

This study examines the impact of learning styles on academic performance using major assessment methods (examinations and assignments including multiple-choice and constructed response questions (CRQs)) in an introductory accounting course. Students' learning styles were assessed using Kolb's Learning Style Inventory Version 3.1. The results indicate that students' learning styles, after controlling for other variables, are associated with academic performance, particularly, in the final examination including both formats, multiple-choice questions and CRQs. Students who exhibit the ‘assimilating’ learning style appear to perform better in some of the assessments than students with ‘diverging’ or ‘accommodating’ learning styles. The findings have implications for designing assessments to ensure that they are not biased towards particular learning styles which would improve their validity and fairness.     

401(k) Investment Decisions and Social Security Reform

Abstract

This paper uses the 1995 Survey of Consumer Finances to show that 401(k) participants with an underlying defined benefit plan are more likely to invest in equities than are participants whose 401(k) is their primary plan. This suggests that workers with a guaranteed source of retirement income are more likely to invest their other retirement assets more aggressively. Removing this guarantee might result in more conservative investment. Therefore, using current 401(k) asset allocation behavior to project income under a Social Security individual account system with reduced guaranteed benefits could overstate returns to these accounts, thus overstating their attractiveness relative to the current system.     

An Empirical Investigation of the Influence of Qualitative Risk Factors on Canadian Auditors’ Determination of Performance Materiality*

This paper presents the results of a field experiment that tested the effects of various qualitative risk factors suggested by auditing standards and prior literature on practicing Canadian auditors’ estimates of performance materiality, a concept introduced by Canadian Auditing Standard (CAS) 320, in the audit of specific accounts in a financial statement audit. Ninety‐four practicing auditors responded to four scenarios and, based on “good” and “bad” versions of six qualitative risk factors, revised or not, as they deemed appropriate, initially established performance materiality for the audit of four different transaction streams/account balances. For all four scenarios, on average, the auditors revised, to a statistically significant degree, performance materiality, downward on the basis of “bad” information and upward on the basis of “good” information. Different combinations of transaction streams/accounts and risk factors were associated with different magnitudes of revision. However, at the level of individual participants, responses were quite varied. Some participants did not revise performance materiality and some even stated that performance materiality should not be revised based on risk‐related information. It may be that the concept of performance materiality as promulgated in CAS 320 and the relationship between overall materiality, performance materiality, and risk requires clarification to provide appropriate guidance for auditors to make performance materiality judgments.     

Discussion of ‘Making Deferred Taxes Relevant’

Abstract

In this discussion of Brouwer and Naarding's article ‘Making Deferred Taxes Relevant’, which is published in this issue of Accounting in Europe, I question several aspects of their proposal to change the tax accounting standard. I argue that a quest for more value relevance of individual balance sheet items is not a good guideline for accounting standard setting. The distinction between book-first and tax-first temporary differences may be helpful for some analytical purposes, but it is not sufficiently robust to serve as a basis for an accounting standard. However, I agree with the authors that the efforts to improve IAS 12 should not be abandoned.     

Beyond under the dome: an environmental documentary amplified public risk perception about air pollution in China

Abstract

Air pollution is a major environmental problem in China and it poses serious risks to public health. Based on the social amplification of risk framework (SARF), this study examines how media, in particular, an impactful environmental documentary titled Under the Dome, influenced Chinese citizens’ risk perception about air pollution. Survey results showed that exposure to the documentary amplified risk perception and risk perception was significantly related to viewers’ information seeking behaviors, policy support, and individual mitigation action about this issue.     

Public Policy and Accounting Research: What Is to Be Done?

Abstract

Singleton-Green [2010. The communication gap: Why doesn't accounting research make a greater contribution to debates on accounting policy? Accounting in Europe, 7(2), 129–145] argues that a communication gap between researchers and those involved in public debates on accounting problems significantly reduces the impact of accounting research. A new ICAEW report, The Effects of Mandatory IFRS Adoption in the EU: a Review of Empirical Research, tries to bridge the communication gap on the subject that it covers. The report found not only a significant amount of relevant research, but also that its usefulness was limited in various ways. The paper makes a number of recommendations to researchers: they should point out any biases in the data they use, address some issues through field work, not assume that surrounding institutions are unchanged, be careful to understand the specific features of the countries they cover, investigate differences in previous research, and state the economic significance of their findings. The paper also makes recommendations for non-academic participants in public policy debates, including: they should actively promote relevant research, help researchers get access to information, and help ensure that researchers have the incentives to do what is needed to benefit public policy.     

Improving Ethical Attitudes or Simply Teaching Ethical Codes? The Reality of Accounting Ethics Education

ABSTRACT

Ethical instruction is critical in accounting education. However, does accounting ethics teaching actually instil core ethical values or simply catalogue how students should act when confronted with typical accounting ethical dilemmas? This study extends current literature by distinguishing between moral/ethical and legal/ethical matters and then re-evaluating the effectiveness of ethics training. A cohort of final-year accounting students with significant ethical training evaluated ethical scenarios. Half were moral (non-legal) and half contained legal as well as moral components. After further ethical instruction they re-evaluated the scenarios. Ethical attitudes towards legal/moral issues improved, but attitudes towards moral-only issues did not. This questions previous studies which purport to demonstrate the effectiveness of ethical instruction and queries the benefits of accounting ethics education. Are fundamental ethical principles being ignored in an effort to prevent more obvious accounting wrongdoings? Accounting ethics training needs to be reassessed if true ethical improvement is to be achieved.     

How do people perceive graphical risk communication? The role of subjective numeracy

This study aims to evaluate directly how a graphical risk ladder is perceived and how this perception is related to people’s subjective numeracy. Gaze durations and frequencies were used to examine visual attention. Participants (N = 47) appeared to focus on the target risk information, whereas referential information was less attended. Subjective numeracy was negatively correlated with total watching time and the absolute number of gaze events. Results suggest that participants with low subjective numeracy have more difficulty in comprehending the graph, and that they process the graphical information less efficiently than the participants with high subjective numeracy. In addition, the position of referential risks on risk ladders could influence people’s risk perception. Based on these findings, we provide some implications for the design of risk communication graphs and for the use of graphs in informing persons with low subjective numeracy about risks.     

New development: Fiscal reform in South Korea: looking back and moving forward

ABSTRACT

At first glance, it seems that South Korea’s three fiscal systems (mid-term expenditure framework, top-down budgeting, and performance management) function well. However, each fiscal system operates separately and they are inefficient because they follow past practices. This article explains what the problems are and how to overcome them.     

Difference of opinion among investors versus analysts

We construct an investor-based measure of differences of opinion (DO) to investigate the different implications of DO between retail investors (DOR), institutional investors (DOI), and analysts (DOA) on asset pricing. Using Chinese stock data, we find that three DO measures (DOR, DOI, and DOI) are negatively related to future returns; DOI’s ability to predict returns can be partly explained by DOR and DOA, whereas DOR contains incremental information not available from DOI and DOA. DOR is more strongly associated with the severe overvaluation caused by retail investors’ optimism than DOI or DOA, emphasising the specific role of retail investors in China’s market. We further show that DOI and DOA are the results of the differences in their information sets, whereas DOR are the results of different interpretations of public information.     

The Impact of DC Pension Systems on Population Dynamics

Abstract

This study investigates the risk inherent in defined contribution (DC) pension plans on an individual and aggregate basis, based on U.S. data. Our aim is to gain insight into the consequences of a DC pension scheme becoming the predominant pillar of retirement income for an entire society. Using the stochastic simulated output of a DC flexible age-of-retirement model, we first determine the optimal investment strategies. We then examine the demographic retirement dynamics of an entire population of DC pension plan participants.

We observe that even for the most risk-averse plan members there is a high level of uncertainty in an individual’s age at retirement. At the aggregate population level, we find that this uncertainty does not get dampened to any great extent by a diversification effect. Instead, the central role played by the market in determining retirement dates results in significant variation in the dependency ratio (the ratio of retirees to workers) over time. In addition, an attempt to ameliorate the outcome by introducing additional realistic features in the DC population modeling did little to dampen this volatility, which suggests that countries dominated by DC schemes of this type may, over time, be exposed to significant risk in the size of its labor force.