The paradox of strategic management accounting

The evidence that strategic management accounting (SMA) techniques have not been adopted widely and that developments in the SMA literature seem to have languished may be consistent with the relatively short lifecycle of most strategic management (SM) tools and many concepts. Nevertheless, there is an inherent contradiction between the apparent decline of SMA and the sustained growth in the number of concepts, models, tools, theoretical perspectives, disciplines, academic and professional journals and consultancy practices that populate the SM domain.This paradox of SMA is explored in the context of the evolution of the SM literature, SMA practice, as exemplified by two recent case studies, and the cognate literatures of management control, performance measurement and knowledge management. It transpires that the SMA literature is based in large part on a narrow, first-era, view of the SM literature that reached maturity with Michael Porter's industry analysis model and generic competitive strategies.The second era of SM that began in 1977 with a move to a more internal, resource-based view of the firm and competitive advantage has been mostly neglected by the extant SMA literature. However, to judge from the small number of published case studies, SMA practices are developing in line with their strategy formulation and organisational processes. The links among the bundle of techniques that are usually included in SMA and between SMA and cognate literatures need to be integrated into a coherent, cohesive framework to complement SM.     

管理会计的核心价值:信息变成利润

在银行业务处理实现了信息化的今天，各家银行日益感觉到管理信息化的落后严重制约了银行的发展。过去，银行通过不断更新自己的金融产品来扩大市场份额；今天，在经济全球化的大环境下，很少有哪家银行拥有别人没有的产品。尽管金融机构的规模和资产不断扩大，但其盈利能力逐渐下降，竞争也变得愈加激烈。随着对新经济模式认识的深入，银行逐渐认识到，     

Pedagogical cases in the strategic development of management accounting systems

Discussion of the ‘lost relevance’ of management accounting and the ‘gap’ between theory and practice has focused the criticism that management accounting education is built round a set of techniques applied in simplified settings. One reason for this may be the scarcity of case studies, discussing management accounting practices, which may be adopted in classroom situations. The recent promotion of ABC, throughput accounting, just-in-time (JIT) methods and performance measures to support modern manufacturing provide additional educational challenges relating to the integration of these into the accounting curriculum. There is a danger that these may also be developed as other techniques to be learned in isolated situations rather than to be applied selectively by organizations in appropriate situations. This paper offers two case studies which support class discussion of accounting requirements within a modern manufacturing and commercial environment. The cases emphasize that any one technique is inappropriate to all situations. They force examination of manufacturing and marketing policy and strategy in the development of appropriate management accounting information. The authors' experiences of using the case studies is evaluated, to determine the strengths and weaknesses of using the non-numerical cases as a basis for class discussion of contextual factors in accounting system design.     

The role of accounting conservatism in management forecast bias

We investigate whether management earnings forecasts fully incorporate information in historical accounting conservatism. We find that management earnings forecasts are more optimistic for firms with greater accounting conservatism in the previous year. We further examine whether this conservatism-related optimistic bias in management earnings forecasts varies with managers’ difficulty predicting earnings accurately, managers’ opportunistic incentives, and the firms’ litigation risk. We find that the negative association between management forecast errors and conservatism increases, to various extent, with the firms’ operating cycles, earnings volatility, and the width of forecast range but does not change with proxies for opportunistic incentives or litigation risk. These results suggest that forecast difficulty is the primary reason for managers’ failure to incorporate conservatism fully in their earnings forecasts.     

The use of accounting information for the valuation of dual-class shares listed on China's stock markets

This study examines whether accounting data are useful in helping explain the market value of listed firms in China. In particular, we focus our investigation on companies that have issued dual-class shares sold to domestic investors (A-shares) and foreigners (B-shares). Domestic accounting standards (DAS) are used for the financial statements of A-shares while international accounting standards (IAS) are used for B-shares. Our results show that IAS earnings information is incorporated in the prices and returns of B-shares. In contrast, A-share investors appear to place most weight on DAS earnings and only recently has there been an association with IAS information. Book values are value relevant for B-share prices but not for A-share prices. Sensitivity tests show that accounting information is more likely to be impounded in share prices and returns for firms with high individual (i.e. non-government) share ownership. Based on our results, we argue that China's move towards the adoption of IAS will be useful for A-share investors, especially in light of the country's recent accession to the WTO and the consequent opening-up of the economy.     

Roz, Inc.: a case for extending management accounting coverage to managers' information acquisition process

Observers of the modern business environment have emphasized that if management accounting is to remain relevant to the realities of the 1990s and beyond, it has to evolve beyond the traditional “gathering, assimilating and reporting function” to encompass the processes whereby information reaches managers. The objective of this teaching case is to assist extending management accounting coverage towards this process.In both Australia and Taiwan, we have successfully used this case to supplement text and end-of-chapter materials at both the advanced undergraduate and graduate levels. The similarity of our teaching experiences between Australia and Taiwan, in conjunction with the generic nature of the case, suggest that it can be used in other national contexts with little or no modification.     

Smart work and hard work: explicating a learning orientation in strategic management accounting

This paper examines the skills and aptitudes necessary to undertake a strategic management accounting project. It argues that individuals involved in such projects are required to work both smart and hard. This argument is developed theoretically by reference to the work of educational psychologists who have identified two different types of goal orientation which people pursue in achievement situations: the learning orientation and the performance orientation. Evidence that strategic management accounting requires a learning orientation is provided by means of a case study which describes its use in a competitive tendering situation. This is followed by a discussion of the potentially symbiotic relationship of strategic management accounting and organizational learning. The discussion leads to the specification of a research agenda that may have significant implications for the practice and learning of management accounting.     

Accounting in markets, hierarchies and networks: The role of accounting in the transnational governance of postal transactions

We examine the changing role of accounting in the development of the international postal system between 1840 and the emergence of the Universal Postal Union (UPU) in 1875. We use the distinction between mundane and opportunistic transaction costs to explain why accounting disappeared as a coordinating mechanism as postal transactions migrated from spot market exchanges, through bilateral contracts (treaties) between nations, into a network of domestic post offices coordinated by the UPU. Our analysis refines the application of transaction cost economics to the understanding of the role of management accounting in different governance mechanisms.     

The timeliness of accounting disclosures in international security markets

In this study, we examine financial reporting lags, the incidence of late filing, and the relationship between reporting lags, firm performance and the degree of capital market scrutiny. We use a large sample of firms spanning 22 countries over a eleven-year period. A focal point of our analysis is whether the incidence of late filing, and the relations between reporting days and other variables, differ systematically between common and code law countries. Relative to U.S. firms, we report that the time taken and allowed for filing is usually longer in other countries and that the statutory requirement is more frequently violated. Timely filing is found to be less frequent in code law countries. Poor firm performance and longer reporting lags are more strongly linked in common law countries. We also find that whereas greater capital market scrutiny and more timely filing are related, there is less support for a relationship between the level of debt financing and timely filing in code law countries.     

The role of structure and agency in management accounting control change of a family owned firm: A Greek case study

This study seeks to understand the changes in management accounting controls in a large Greek company (pseudonym: FA), with a focus on understanding the role of structure and agency in this change. In order to do this, we have employed a critical realist philosophy, pioneered by Roy Bhaskar (Bhaskar, 1979; 1997). We believe that the empirics of the case, the time span under consideration, and our theoretical approach provide us with a unique opportunity to explore the role of structure and agency in changing management accounting controls within the case firm. Our analysis revealed that changes in management control practices in FA were a function of different interacting structural conditions as mediated through human agency. This paper contributes to the debate about how to conceptualise agency and structure in management accounting control change (Kilfoyle and Richardson, 2011). Our analysis also demonstrates that the ‘dualism’ approach to agency and structure will result in a better analysis of management accounting control changes within firms.     

The impact of professional standards on accounting judgments: The role of availability and comparative information

Given scant research on the influence of the AICPA’s Code of Conduct, this study examines the effects of professional standards for advocacy and integrity on a financial reporting decision. Based on the availability and priming literature, we test whether the current wording of two AICPA professional standards influence financial reporting decisions. Prior accounting research has documented cases where professionals were inclined toward a conservative or skeptical bias (Francis & Krishnan, 1999; Jenkins & Lowe, 1999) while other studies have documented an inclination toward a client-confirming bias (Hackenbrack & Nelson, 1996; Roberts, 2010). Our study examines whether using AICPA ethical standards as primes results in a neutral, unbiased financial reporting decision in a context in which there is substantial, yet inconclusive, evidence. Roberts (2010) documents the tendency for professionals to view integrity and advocacy as segregated objectives: one for promoting unbiased reporting, associated frequently with accounting-related decisions, and the other condoning client advocacy, typically associated with tax-related judgments. Hence, we test for availability effects based on separately-stated standards. However, the literature on comparative analysis explains that a combined concept containing counterbalancing features allows the participant to form causal relationships between the distinguishing components. This type of mental process brings the causal knowledge into working memory. Hence, a joint presentation of countervailing standards should result in a more balanced judgment, reflecting neither a conservative nor pro-client tendency.The psychology literature suggests that heuristics, such as availability priming and comparative analysis, are more likely to affect novice decision makers (e.g., jurors, clients, new hires, students) than experts whose work experiences could drive the results. This study examines the responses of upper-level accounting majors, and the results show that the participants are inclined toward conservative decision making. Participants exposed to a separately-stated standard for integrity respond conservatively, just as they do in a control group without explicit access to the professional standard. Similarly, even when exposed to AICPA Rule 102-6 allowing client advocacy, they report conservatively. In contrast, when the prime is a joint presentation of the standards, participants respond with an unbiased decision, which differs significantly from the consistently conservative response by the control group as well as by the participants primed with an isolated standard. We conclude that two AICPA standards (as currently worded) are best understood when they are aggregated. Whether this finding holds for professionals is an empirical question for future research. The implication is that accountants’ decision making could be enhanced by a revised professional standard reminding them to jointly consider the goals of unbiased decision making and justifiable client advocacy.     

An exploratory investigation of an integrated contingency model of strategic management accounting

This study examines the effect of strategic choices, market orientation, and company size on two distinct dimensions of strategic management accounting (SMA) and, in turn, the mediating effect of SMA on company performance. A model is advanced and tested using structural equation modelling and data collected from a sample of 193 large Slovenian companies. The validity of the quantitative data findings has been appraised using qualitative data collected in ten exploratory interviews. The study’s findings support contingency theory’s tenet of no universally appropriate SMA system, with factors such as company size and strategy having a significant bearing on the successful application of SMA.     

Nominal shocks in monopolistically competitive markets: An experiment

A market experiment examines the capacity of price and information frictions to explain real responses to nominal price shocks. Results indicate that both price and information frictions impede the response to a nominal shock, as predicted by the standard dynamic adjustment models. Observed adjustment delays, however, far exceed predicted levels. Results of a pair of subsequent treatments indicate that a combination of announcing the shock privately to all sellers (rather than publicly) and a failure of many sellers to best respond to their expectations explains the observed adjustment inertia.     

Sudden changes in volatility in emerging markets: The case of Gulf Arab stock markets

This article examines sudden changes in volatility for five Gulf area Arab stock markets using the iterated cumulative sums of squares (ICSS) algorithm and analyzes their impacts on the estimated persistence of volatility. This algorithm identifies large shifts in volatility of the stock markets during the weekly period 1994 to 2001. In contrast to Aggarwal et al. [Aggarwal, R., Inclan, C., & Leal, R., 1999, Volatility in emerging markets. Journal of Financial and Quantitative Analysis 34, 33-55], this paper found that most of the Gulf Arab stock markets are more sensitive to major global events than to local and regional factors. The 1997 Asian crisis, the collapse of oil prices in 1998 after the crisis, the adoption of the price band mechanism by OPEC in 2000, and the September 11th attack have been found to have consistently affected the Gulf markets. Accounting for these large shifts in volatility in the GARCH(1,1) models significantly reduces the estimated persistence of the volatility in the Gulf stock markets.     

The impact of accounting information quality on the mispricing of accruals: The case of FRS3 in the UK

We exploit a unique setting of accounting regulation change to examine how accounting information quality affects the well-documented accrual anomaly. We show a significant reduction in the negative return predictability of accruals among UK companies with poorer accounting information quality following the introduction of Financial Reporting Standard No. 3: Reporting Financial Performance (FRS3). While the functional fixation hypothesis attributes the mispricing of accruals to the judgemental error of end-users of information, our findings suggest that the supply side of information also plays a crucial role. Our results provide evidence that regulatory interventions seeking to improve accounting information quality can reduce the mispricing of securities in the capital market.     

Assessing competition in hospital care markets: the importance of accounting for quality differentiation

Quality differentiation is especially important in the hospital industry, where the choices of Medicare patients are unaffected by prices. Unlike previous studies that use geographic market concentration to estimate hospital competitiveness, this article emphasizes the importance of quality differentiation in this spatially differentiated market. I estimate a random-coefficients discrete-choice model that predicts patient flow to different hospitals and find that demand responses to both distance and quality are substantial. The estimates suggest that patients do not substitute toward alternative hospitals in proportion to current market shares, implying that geographic market concentration is an inappropriate measure of hospital competitiveness.     

The role of hindsight in foresight: refining strategic reasoning

The purpose of this paper is to deepen understanding of the role that hindsight plays in foresight. The authors argue that the past is not an isolated static state, but one that is intimately connected with the future. However, there are several biases that influence our perceptions and conceptions of the past. These biases act as constraints on our ability to understand the driving forces that emerge from the past, play out through the present and become the critical uncertainties in the future. They could result in misperceptions about events or processes and so may impair foresight methodologies, such as scenario thinking. Such a foresight bias is characterized by a combination of hindsight biases, creeping determinism and searching for information that corresponds to people’s views about both the past and the future.The cognitive linkages between past, present and future are discussed and the role of counter-to-factual analysis is emphasized as an antidote to the foresight bias. Counter-to-factual analysis is both a cognitive process and an analytical reasoning tool applied to the analysis of historical data. Using insights generated from the explorations of counter-to-factual reasoning, the authors present a hindsight-foresight paragon that fortifies current foresight enhancing techniques with counter-to-factual analysis.

Two Roads diverged in a yellow wood,

And sorry I could not travel both

And be one traveler, long I stood

To where it bent in the undergrowth…

Two roads diverged in a wood, and I-

I took the one less traveled by,

And that has made all the difference.

The Road Not Taken, Robert Frost

Men’s curiosity searches past and future

And clings to that dimension. But to apprehend

The point of intersection of the timeless

With time, is an occupation for the saint—

T. S. Eliot, from The Dry Salvages     

The role of accounting in financial disclosure

This paper examines the various demands facing accounting in attempting to supply diverse groups with differing needs the data they desire. Beginning with the notions that, first, accounting is trying to describe a complex stewardship relation and, second, that what we call accounting is in reality many accountings, it examines several current issues in financial disclosure. Essentially, it concludes that a complex set of economic relations must simultaneously rely on several distinct accountings to properly perform the task of disclosure. In general, this conclusion is viewed as desirable.     

Issues arising for accounting harmonization: The case of stock options in Italy

In Italy, national generally accepted accounting principles (GAAP) and International Financial Reporting Standards (IFRS) regulations coexist, despite differences that lead to their antagonist forms of accounting relativism. In this context, the two accounting systems provide for different representations of stock options plans, with significant effects on year-end income measures. This study therefore considers the emblematic case of stock options with the goal of demonstrating, on the basis of the dominant accounting principles and conventional wisdom in Italy, that the aforementioned difference cannot be explained by reasons connected with the accounting conceptual framework of reference in each system. Rather, inquiries should focus on weaknesses in national GAAP.     

The case for case management

An effective case management program can help healthcare organizations: Position the organization for changes under healthcare reform with coordination of care across the healthcare continuum. Enhance quality of care with an interdisciplinary team focus on the progression of the plan of care. Increase payment and decrease costs by expediting patient discharge. Improve the revenue cycle process by ensuring accurate coding for prompt billing, reducing denials, and improving contracting terms with managed care payers. Proactively prepare for Recovery Audit Contractor audits and protect against unfavorable results.