Problem-solving styles of accounting students: Are expectations of innovation reasonable?

In response to input from the profession, accounting programs are attempting to increase the innovative problem-solving skills of their students. However, they have done so without data on what the problem-solving styles of their students are, and without an understanding of the capacity for innovation by different problem-solving styles. This study compares the problem-solving styles of accounting students with other business majors and business minors. Results indicate that accounting students are predominantly adaptive in problem-solving style. Statistical analysis shows a significant difference in the problem-solving style of accounting students and other business majors, with other business majors more likely to be innovative. Implications of these findings for changes in the accounting curriculum and for the profession are discussed.     

Discussion of: “Flattening the organization: the effect of organizational reporting structure on budgeting effectiveness”

This paper is a discussion of Hannan et al. (Rev Account Stud, 2010), wherein subordinate-participants are endowed with private information, and superior-participants can potentially affect budget requests through their ability to reject them. Their findings are of interest to research on both the design of budgeting systems and span of control. I discuss the relevance of HRT to these literatures and comment on their implementation and experimental design. Also, I offer suggestions for future research, one of which is to explicitly introduce monitoring into experiments on span of control.     

The efficient markets hypothesis: The demise of the demon of chance?

Many commentators have suggested that economists in general and financial economists in particular have some responsibility for the recent global financial crisis. They were blinded by an irrational faith in a discredited Efficient Markets Hypothesis and failed to see the bubble in asset prices and to give due warning of its collapse. There is considerable confusion as to what this hypothesis is and what it says. The irony is that the strong implication of this hypothesis is that nobody, no practitioner, no academic and no regulator had the ability to foresee the collapse of this most recent bubble. While few economists believe it is literally true, this hypothesis is considered a useful benchmark with some important practical implications. Indeed, a case can be made that it was the failure to believe in the essential truth of this idea, which was a leading factor responsible for the global financial crisis .     

Futurist networks: cases of epistemic community?

This article analyses the concept of epistemic community focusing the attention on two aspects, which contribute to define this ‘actor’: knowledge and capacity of acting under the conditions of uncertainty. The link between these two issues and the ‘nature of future studies’ is considered and the possibility of considering some organisations and institutions as future epistemic communities is explored. The case of the World Futures Studies Federation is examined in detail.In 1992, Peter Haas defined an ‘epistemic community’ as follows: “an epistemic community is a network of professionals from a variety of disciplines and backgrounds, they have a shared set of normative and principled beliefs, which provide a value-based rationale for the social action of community members; shared causal beliefs, which are derived from their analysis of practices leading or contributing to a central set of problems in their domain and which then serve as the basis for elucidating the multiple linkages between possible policy actions and desired outcomes; shared notions of validity—that is, inter-subjective, internally defined criteria for weighing and validating knowledge in the domain of their expertise; and a common policy enterprise—that is a set of common practices associated with a set of problems to which their professional competence is directed, presumably out of the conviction that human welfare will be enhanced as a consequence” [1].In ancient Greek, the term ‘episteme’ has a meaning which belongs to the philosophical sphere; ‘community’ is a concept which comes from the religious tradition and, more recently, has been the objective of sociological studies. Epistemic community links the two terms to indicate a ‘new’ and in some aspects, atypical political actor. At etymological level we already have a first sort of indication with respect to what is meant: politics as a synthesis of religion (faith), sociology (the decisions taken by policy makers have consequences on the whole society) and philosophy (intended as Weltanschaung). The German term Weltanschaung means the idea, concept or the ‘vision’ of the world and life. It is the way in which an individual or a social group considers the position of the human being in the world and the attitudes and actions they develop on the basis of a particular vision of the cosmos.In addition to this formal definition, Haas identifies other characteristics: “members of an epistemic community share inter-subjective understandings; have a shared way of knowing; have shared patterns of reasoning; have a policy project drawing on shared causal beliefs, and the use of shared discursive practices and have a shared commitment to the application and production of knowledge” [1].This definition could be analysed in several ways with particular attention to one or more of the indicated criteria. We could assume that the expression ‘possible policy actions and desired outcomes’ is to be understood as the ‘long term implications, expected, possible, probable and desired’ of a decision taken or that which will be taken, and this would already represent a linkage between the policy, the futures studies and an epistemic community; moreover, usually ‘the policy choices concern consequences, which can only be partially anticipated’ [2]. This gives rise ‘to the desire for information, which is not so much based on purely technical knowledge but rather information, which is the product of human interpretation’ [1]. Epistemic communities, national or trans-national, are one possible provider of such information.At this stage, and considering only this aspect of the whole definition, we could argue that a network of experts active in the field of future studies would represent the perfect portrait of what we are looking for: a multi-person actor able to ‘anticipate’, using knowledge, various backgrounds and expertise. To anticipate, in this context, might be specified as to understand or comprehend global and local changes. In general, futurists work within the framework of complexity and uncertainty, try to re-define problems in broader context and attempt to comprehend ‘change’ using knowledge.An example could be helpful: the change we are experiencing in Eastern European countries appears as multi-dimensional: in less than 15 years those countries have moved from a

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socialist economy (closed and planned), to a

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‘Western economy’ (the so-called market economy), to a

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technological one as a consequence of globalisation and, lastly,

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to the learning economy.

The first step (socialist economy), recalls other sectors in which the ‘ideas’ were closed and planned. The society was divided into classes and the dominant concept was ‘war’. In this context, every single action was intended as a possibility to demonstrate the points of strength of a system: sports, culture and economy were part of the battle and the vision of the future was mostly influenced by the possibility to destroy or to be destroyed. Examples of these considerations could be seen in the choice made by the USA government in its participation at Olympic Games in Moscow (1980), the USSR’s answer in 1984 (Los Angeles Olympic Games) and the proliferation of nuclear holocaust movies such as The Day After. These ideas were strongly present amongst the people of the Eastern countries, but after 1989, things changed and ‘gradually’ the new paradigms based on ‘Western values’ and, for a few, Western lifestyles, emerged. Probably these changes caused shocks in the local societies, shocks that have had consequences also in the way these societies now see their futures. The third step, the shift to a technological economy, has been faster and wider, thanks largely to the new communication technologies and the Internet. In understanding and developing alternative futures for Eastern Europe, futurists have to take account of the fact that all the three economies exist side by side—Eastern Europe does not represent one or the other economies, it is a complex mix of all the three economies. This complexity is further augmented by the fact that Eastern European societies have not had enough time to understand their present in order to be able to desire possible, alternative futures. Further, economic competitiveness is now based more and more on the capacity to develop and apply knowledge [3]. Thus, futures of Eastern Europe are a function of its capacity to develop relevant new forms of knowledge. Futurists cannot afford to ignore this connection between the knowledge and alternative futures.Thus, the concept of epistemic community and the theory of ‘knowledge economy’ have a great deal in common. If we consider that the so-called ‘decision-makers’ are (in democratic countries) elected by the people, we can argue that that section of the people able to disseminate consciousness of problems, possible solutions and long term implications, posses a form of power. Without engaging with this power, we cannot shape viable and meaningful futures.Are there any trans-national networks of expert where it is possible to identify these characteristics of an ‘embryonic’ epistemic community? In some respect this could be the case of the World Futures Studies Federation (WFSF), or of the Washington-based World Future Society (WFS) or, at regional level, of the Namur-based euroProspective or the Finland Futures Research Centre, where we have structured networks of the experts coming with different experiences, from different backgrounds, a common interest (to analyse the society from different perspective, but all future oriented), a shared task (to disseminate the use of futures studies not only as a tool but also as a way of thinking) and diversity in knowledge, which is what keeps them together. Moreover, for most of the members, the idea of knowledge economy is already their reality and the capacity to understand trends, possible (or even better) probable futures is the aim of their professional activities.If we briefly consider those organisations, we could assume that they already posses some aspects related to the concept of epistemic community: the WFS for example “strives to serve as a neutral clearinghouse for ideas about the future, membership is open and the Society includes 30,000 people in more than 80 countries from Argentina to Zimbabwe. Members come from all walks of life, they include sociologists, scientists, and educators” [4]. If the WFS’s main strength is in trans-national partnership and different backgrounds of its members, the regional experience that euroProspective is carrying out is mostly based on the construction of a European network of experts. The inter-exchange of ideas and a common ‘mission’ are the two elements, which could let us consider this organisation as futures epistemic communities. Another example, at national/regional level, is the one provided by the Finland Futures Research Centre; the link with epistemic community is offered by the activity and the nature of some projects of this institution such as ‘sustainable energy development in developing countries’, ‘Russian energy and global climate’, ‘collisions of nature and culture in transport policy’, ‘professional delphiscan, an expert system’ [5]—all of these projects or tools (delphiscan is a software) are aimed at producing a relationship between political power and future and knowledge power.There are several reasons why we cannot consider the WFSF by itself as an epistemic community. Perhaps the most important is that it does not have a direct link with the political power; neither does the Federation seek any kind of influence on public authorities or on the decision-making process. But in as much as the Federation is concerned with managing change, it could be considered as an actor able to help people and the institutions understand the on-going processes of change. In the coming years, it will probably be forced to become an epistemic community as it will be necessary to ‘represent and clarify the relation between knowledge management, ICT usage and experts in futures studies as mediators between the complexity of political decision and the tendency of institutions to became advanced learning organisation’ [6] and [7].We also need to study the role the futures studies can play in clarifying those ‘shadow zones’ between the political power and the complexity of the decision-making processes. In this respect, it has to be underlined that the demand for the expert advice is a common phenomenon in policy-making processes, at local, national and international level. All this processes have a concrete objective, which would offer the possibility to exploit the added value of a ‘federation intended as a sort of epistemic community’: the credibility of the futures studies and, consequentially, the credibility of the experts active in this field, depends on this. The debate and the progress of these considerations should be developed in a multi-disciplinary and trans-disciplinary way with respect to several subjects and research areas, but this is only a logical consequence of the ‘nature and the different backgrounds’ already represented in the Federation.A theme (which emerged during the conference held in Brasov), which allows us to identify a relationship between an epistemic community and the social needs is globalisation. While globalisation is difficult to pin down, it is quite evident that we are living through a phase of transition. But as futurists and a potential epistemic community, our goal ought to be to develop an understanding of, and perspectives on, post-globalisation societies. This suggests that we need to identify the relationships between an epistemic community, the futures studies and the organisations active in this field such as WFSF and euroProspective.The analytical tools offered by the concept of epistemic community seem appropriate under the current prevailing conditions of uncertainty and ignorance. Understanding uncertainty and bringing multi-faceted expertise and knowledge to analyse difficult problems and propose future solutions are the two fundamental characteristics of futurists. The constitution of a network of experts coming from different backgrounds is already a reality inside the Federation but, at the moment, there is no linkage with the traditional and democratic forms of power. To become an active epistemic community, the WFSF has to realise its potential and develop these much needed linkages.     

New development: Commercialization of the English National Health Service: a necessity in times of financial austerity?

ABSTRACT

This article examines income received by National Health Service (NHS) providers from non-NHS sources. In 2015–2016, it amounted to 9.1% of their revenue. In the English NHS, there is an increasing reliance on non-NHS income to provide revenue for NHS organizations, due in part to government’s austere financial plans. This article is the first comprehensive analysis of these financial data for all English organizations. It provides new evidence in the ongoing debate about the nature and values of public service organisations and the role of commercial imperatives.     

Financial advisors: A case of babysitters?

We use two data sets, one from a large brokerage and another from a major bank, to ask: (i) whether financial advisors are more likely to be matched with poorer, uninformed investors or with richer and experienced investors; (ii) how advised accounts actually perform relative to self-managed accounts; (iii) whether the contribution of independent and bank advisors is similar. We find that advised accounts offer on average lower net returns and inferior risk-return tradeoffs (Sharpe ratios). Trading costs contribute to outcomes, as advised accounts feature higher turnover, consistent with commissions being the main source of advisor income. Results are robust to controlling for investor and local area characteristics. The results apply with stronger force to bank advisors than to independent financial advisors, consistent with greater limitations on bank advisory services.     

Investors’ perception of corporate governance: a spillover effect of Taiwan corporate scandals

The discovery of a series of corporate scandals in Taiwan between 16 June and 15 September 2004 offers a unique opportunity to investigate the perceptions of investors on the value of corporate governance, whilst avoiding any interactions with other exogenous factors such as the lower expected returns on all firms’ investment opportunities during the East Asian or Global financial crises. The main line of reasoning in this study is that at times when news of scandals flows into the market, the perceptions of certain type of investors will lead to a change in their trading habits for non-scandal portfolios. With a comprehensive analysis of order and trade data for all investors identified by investor code, it is found that a substantial proportion of investors ceased trading altogether during the scandal period. This response was particularly discernible among small and medium individuals, despite the fact that the firms in these portfolios were not associated with the scandals. We further examine the ordering behavior of those investors who still traded in the market. It shows that small individual investors began to enter the market more passively, regardless of whether the firms’ ownership structure. And they consistently underperformed in both ownership-structure portfolios. However, foreign institutions and large individuals place more aggressive orders for stocks in firms with strong cash-flow rights leverage and perform particularly well in those portfolios.     

Investors’ perception of CEO overconfidence: evidence from the cost of equity capital

Prior literature documents that CEO overconfidence plays an important role in corporate financial reporting and accounting decisions. However, an unexplored issue is how investors perceive the risks associated with CEO overconfidence. This study examines the effect of CEO overconfidence on the cost of equity capital. We find that the association between CEO overconfidence and the cost of equity is nonlinear: a moderate level of CEO overconfidence results in the lowest cost of equity capital after controlling for other known determinants of the cost of equity. We also find an inverted nonlinear relation between CEO overconfidence and equity issuance, which corroborates our main conclusion of the nonlinear effect of CEO overconfidence on the cost of equity. Our results are robust to alternative overconfidence measures, cost of equity measures, and change analysis.     

Discussion of “Contagion of accounting methods: evidence from stock option expensing”

Reppenhagen (Rev Account Stud, 2010) investigates how and through which channels contagion, i.e., accounting methods used by related firms, can influence a firm’s accounting choice. My discussion focuses on research design choices and the potential effect of factors other than those investigated in the study.     

Erratum to: ‘Statistical estimate of the proportional hazard premium of loss’

The asymptotic variance of the risk premium estimator, proposed by Necir et al. (2007), is revised, by using the right asymptotic approximation of the uniform empirical quantile process.     

REIT Economies of Scale: Fact or Fiction?

The real estate industry has recently witnessed significant and pervasive consolidation with further growth and consolidation generally viewed as inevitable. For example, between 1990 and 1997, growth in average net real estate investments by large REITs outpaced growth in average net real estate investments by small REITs by 13 percent. However, no systematic study of the benefits of this consolidation exists. This research studies whether or not there are gains to consolidation due to economies of scale from size, brand imaging, and informational gains from geographic specialization. Our sample consists of 41 multifamily equity REITs, for whom financial and property level data are available in the SNL REIT Database. Using this data, we construct shadow portfolios that mimic each REITs exposure to changes in local market conditions. Our results show no size economies, that branding in real estate is allusive, and that geographic specialization, in agreement with Gyourko and Nelling (1996), has no significant benefit.     

Summary of “evaluating your curriculum”: A report by the Federation of Shools of Accountancy Committee on Assessment of Curriculum Changes

The Accounting Education Change Commission (AECC) has called for change in the accounting curriculum “so that entrants to the accounting profession possess the skills, knowledge, and attitudes required for success in accounting career paths (AAA, 1986). Concluding that “change just for the sake of change may not bring any improvement,” the Federation of Schools of Accountancy (FSA) charged its Committee on Assessment of Curriculum Changes in January, 1991 “ to identify the theories and suggest methods to allow Departments and Schools of Accounting to measure the results of curriculum changes (FSA, 1991).” ¹ This paper summarizes the committee's findings and its recommendations regarding issues that should be addressed by accounting programs undertaking the development of an assessment program.²     

Option trading: Information or differences of opinion?

This paper investigates the motive of option trading. We show that option trading is mostly driven by differences of opinion, a finding different from the current literature that attempts to attribute option trading to information asymmetry. Our conclusion is based on three pieces of empirical evidence. First, option trading around earnings announcements is speculative in nature and mostly dominated by small, retail investors. Second, around earnings announcements, the pre-announcement abnormal turnovers of options seem to predict the post-announcement abnormal stock returns. However, once we control for the pre-announcement stock returns, the predictability completely disappears, implying that option traders simply take cues from the stock market and turn around to speculate in the options market. Third, cross-section and time-series regressions reveal that option trading is also significantly explained by differences of opinion. While informed trading is present in stocks, it is not detected in options.     

Theme: Whole of government accounting— international trends

This article reconstructs the literature on corporate turnaround in terms of its recurring features. It then tests these against the experience of four very different cases of the turnaround or attempted turnaround of public and non-profit organizations. It concludes that while some concepts from the corporate literature usefully highlight important aspects, other critical complicating features of what is needed to achieve a turnaround in public and non-profit contexts would be overlooked or poorly treated if the situation were considered simply in these terms. These complicating features deserve the attention both of practitioners and researchers.     

Genetic counselling: ethical mediation of eugenic futures?

This paper examines some proposals concerning the involvement of genetic counsellors in reproductive decisionmaking. This involvement represents the future situation as being shaped decisively by the “relevant” knowledge of powerful medical and other political interests. The paper deconstructs and reorders this proposed knowledge in order to make it problematic. The projected involvement of genetic counselling backed by claims of ethical expertise is rendered denaturalised and particular, opening a conceptual space for the emergence of other futures. An alternative future in which public communication, not private medical decisions, is given as the primary ethical focus.     

Tests of market models: heteroskedasticity or misspecification?

This paper investigates the nature and the incidence of heteroskedasticity and misspecification in the market models by utilizing tests that are generally applicable. The results show that heteroskedasticity appears more frequently than misspecification even though both are serious problems. The evidence also indicates that the use of a quadratic market model or equally weighted market returns may lead to a smaller percentage of heteroskedastic cases but that, in general, this advantage has to be offset against an increase in the occurrence of specification errors. Small firms and January returns are also observed to produce a higher incidence of both heteroskedasticity and misspecification.     

China's land market auctions: evidence of corruption?

In China, urban land is allocated by leasehold sales by local officials. Attempting to end widespread corruption, the government now requires sales to be conducted publicly, by either English or “two‐stage” auctions. However, corruption persists through the choice of auction format and preauction side deals between favored bidders and local officials. Two‐stage auctions have a first stage where favored developers signal that auctions are “taken,” deterring entry of other bidders. Empirics show that both sales prices and competition are significantly less for two‐stage than English auctions. Selection on unobserved property characteristics is positive: officials divert hotter properties to two‐stage auctions.     

Discussion of: The option market’s anticipation of information content in earnings announcements

Billings and Jennings (2011) develop a new measure of stock price sensitivity to earnings called anticipated information content (AIC). The main difference between an AIC and an earnings response coefficient (ERC) is that AICs measure expected rather than actual sensitivity. I evaluate the AIC’s potential usefulness in future research, and conclude that AICs have several disadvantages relative to ERCs but might be useful in rare circumstances. Estimates of AICs contain considerable measurement error and fail a primary test of construct validity when left uncorrected. I outline a method for correcting two of the three sources of measurement error, which can be used by researchers interested in pursuing work on AICs. The method may have uses beyond computing AICs because it yields a prediction of the unsigned change in stock price during a scheduled event window.