An empirical study of research and development top managers' perceptions of short-term pressures from capital markets in the United Kingdom

It is often argued that capital market pressures are increasingly directed towards short-term performance evaluation of managers and their operations. Whether these external capital market pressures actually exist or not, short-term pressures on firms are influenced by managers' own perceptions of these external pressures. If managers perceive the existence of these external pressures it is likely that this will lead to short-term behaviour on their part. The purpose of this paper is therefore to examine (a) research and development (R&D) managers' perceptions of short-term behaviour in capital markets in the UK, and (b) patterns of behaviour relating to R&D which may be influenced by these perceptions. The findings of this study indicate that approximately half of the UK research and development managers perceive capital markets as responsible for putting inappropriate short-term pressures on their companies' management. However, an even larger proportion report short-termist behaviour relating to R&D and its evaluation, suggesting that some at least of the problem of ‘short-termism’ is internally generated.     

基于灰色关联的首批试点城市(区)科技保险实施绩效测算

科技保险能有效转移企业技术创新活动中面临的科技风险,对促进我国科技进步和经济发展有着重要意义。本文运用灰色理论构建灰色关联评价模型,测算了全国第一批6试点城市(区)科技保险实施的绩效,找出了指标体系中影响首批试点城市(区)科技保险实施绩效的主要因素,并在此基础上提出了改善目前我国科技保险实施绩效的相关建议。     

Further evidence of the effects of normalization on end-user query errors: an experimental evaluation

The proliferation of Windows-based programs for PCs, together with the requirement of many business managers for faster responses to their information needs, has led many business end-users to create, maintain, and query their own databases. These individuals use the output of these queries as the basis for operational, tactical, and strategic decisions. To maximize the benefit of end-users' time, querying these databases must be as efficient as possible. Of even greater importance, the effectiveness of managers' decision-making is directly related to the quality of the information extracted. Because end-user querying is error prone, characterizing the sources of query errors and using that knowledge to improve the effectiveness of end-user query development can improve the quality of information available for decision-making.IS professionals typically design databases in third normal form. End-user databases designed with the help of IS professionals are also likely to be in third normal form. Although third normal form is better for data capture, prior research indicates third normal form is not necessarily the most appropriate normal form for querying. This paper reports the results of an in-depth experiment into the effects of normalization level on the efficiency and effectiveness of end-user querying. The results confirm earlier findings that end-users querying first normal form data structures were both more efficient and more effective than those querying third normal form data structures. This research extends prior research by examining the specific areas where first normal end-users outperform third normal form end-users. In particular, the experiment revealed that first normal form end-users made significantly fewer errors in relation to attribute selection, table selection, and row restriction.     

Investor reactions to derivative use and outcomes

How do investors evaluate managers who choose whether or not to use derivatives once the outcomes of those decisions become known? Different theories offer different predictions, and we test these in three experiments. Results show that investors are more satisfied with firm managers and assign a higher value to firms when managers use derivatives (that address firm risks) than when they do not. This result occurs even though we hold constant the economic differences typically present when comparing derivative use versus non-use (that is, ex ante risk and ex post outcome), suggesting that investors reward firms that use derivatives. Additional tests reveal that investors believe that managers who use derivatives in these situations exhibit a higher level of decision-making care than those who do not use derivatives. We also document that these inferences about greater decision-making care do not apply to the speculative use of derivatives. Overall, our study adds to our understanding of how investors judge companies that use derivatives, given the resulting outcomes of such use.     

For which purposes do managers use Balanced Scorecards?: An empirical study

The accounting literature frequently publishes articles that establish the adoption rates of accounting information systems, such as the Balanced Scorecard (BSC) or Activity-Based Costing, and subsequently examines the factors that drive this adoption. However, much less is known about the specific purposes for which these systems are used.In this paper, I examine the purposes for which managers use the Balanced Scorecard. Data was collected from a survey administered in 19 Dutch firms which had indicated that they used a BSC. The survey resulted in 224 responses from individual managers. Using exploratory factor analysis on Doll and Torkzadeh's [Doll, W.J., Torkzadeh, G., 1998. Developing a multidimensional measure of system-use in an organizational context. Information and Management 33, 171–185.] instrument of multidimensional MIS usage, I find that managers use the BSC for: (1) decision-making and decision-rationalizing; (2) coordination; and (3) self-monitoring.In the second step, I consider drivers of BSC usage for the three different purposes. These drivers are dimensions of evaluation style, alternative controls that are used in the organizational unit, and the receptiveness of managers to new types of information. I find that BSC usage for decision-making and decision-rationalizing purposes is driven by the degree of action controls used and manager's receptiveness to new information types. BSC usage for coordination purposes is driven by the emphasis placed on managerial evaluation of subordinates and the manager's receptiveness to new types of information. Finally, BSC usage for self-monitoring purposes is driven by the emphasis placed on managerial evaluation.     

ESG Investing in Emerging and Frontier Markets

The authors discuss the benefits of considering material environmental, social, and governance (ESG) factors when investing in emerging and frontier markets. Companies that operate in these markets face a myriad of operating challenges, and management teams that respond to such challenges effectively can achieve superior financial performance over time. They are able to grow faster, achieve higher profitability, reduce their cost of capital, and manage exogenous risks better than their peers. For investment managers, integrating sustainability into the analysis process provides a differentiated lens to identify companies that possess strong competitive advantages that can drive value creation over time. At the same time, it can help investment managers avoid companies that have embedded risks in their business model or operations that may not be entirely visible to the market. Finally, given the early‐stage nature of many of these markets and the sometimes uneven understanding of sustainability issues at a company level, the authors argue that active ownership can be an important driver of alpha generation by fund managers. Engaging constructively with board members and management teams to improve a company's ESG profile can help drive operational improvements, strengthen the risk management function, and upgrade investors’ perception of the quality of the management team.     

Corporate Management of Highly Dynamic Risks: Evidence from the Demand for Terrorism Insurance in Germany

This paper investigates a corporation's risk management response to highly dynamic risks. Using a unique data set on the German terrorist insurance market, the paper tests whether corporate risk managers have a clear understanding of the probability distribution of highly dynamic risks or if risk managers learn from severe losses and base their decisions upon day-to-day experience. The paper further investigates whether risk managers become more confident in their risk management decisions over time. For this purpose, we apply Viscusi's prospective reference theory to a corporate context. We find that firms learn from single events when making their risk management decisions, and that risk managers become more confident with their risk management decisions over time.     

Loan loss provision decisions: An empirical analysis of the Spanish depository institutions

Accountants and financial economists have long held concerns that inefficient loan loss accounting may have a material impact on reported capital and earnings, especially in the banking industry. Prior research has examined banks’ incentives to manipulate loan loss provisions (LLPs) and the resulting impact. However, most of this research has focused on management incentives and other determinants of LLP decisions without addressing the relevant factors associated with best-practiced or efficient LLP decision-making. In this paper, we identify a stochastic frontier model that examines the “efficiency” of the LLP decisions of bank managers. Further we explore the relationship between efficient LLP decision-making and relevant factors that could potentially explain any inefficiency. Our evidence indicates that there is considerable inefficiency in loan loss decision-making among the sample institutions. The research is based on data from the Spanish banking industry, which is particularly relevant in light of the recent deregulatory initiatives in Spain. The findings in this study with regard to the existence of inefficiency in loan loss decisions and the causes of such inefficiency have far-reaching implications for regulators throughout Europe.     

Framing risks in a safety‐critical and hazardous job: risk‐taking as responsibility in railway maintenance

In risk management research, risk‐taking is mostly treated as deviation that calls for improved risk communication. I argue, however, that risk‐taking should be seen as expressing a rationale of its own; thus, improving safety requires that this rationale be adequately understood and that the conditions that reproduce risk‐taking be changed. This argument is supported by an ethnography of railway maintenance in Sweden. Railway technicians are charged with maintaining the railway infrastructure to support safe and punctual trains, an assignment that exposes them to occupational hazards. The technicians' claim of occupational responsibility for transportation safety risks is framed by two notions in occupational discourse: first, the safety‐critical nature of their tasks, and second, the notion of service to the general public. Technician interdependence in achieving occupational safety requires mutual responsibility in the team. Technicians justify occupational risk‐taking, claiming it is sometimes needed to achieve production goals given the available time and resources and the manageability of the risks taken. Finally, I stress the need for technicians to change their frames of reference and for employers to assume responsibility for reducing the need for risk‐taking.     

Can company-fund manager meetings convey informational benefits? Exploring the rationalisation of equity investment decision making by UK fund managers

Conventional economic theory, applied to information released by listed companies, equates ‘useful’ with ‘price-sensitive’. Stock exchange rules accordingly prohibit the selective, private communication of price-sensitive information. Yet, even in the absence of such communication, UK equity fund managers routinely meet privately with the senior executives of the companies in which they invest. Moreover, they consider these brief, formal and formulaic meetings to be their most important sources of investment information. In this paper we ask how that can be. Drawing on interview and observation data with fund managers and CFOs, we find evidence for three, non-mutually exclusive explanations: that the characterisation of information in conventional economic theory is too restricted, that fund managers fail to act with the rationality that conventional economic theory assumes, and/or that the primary value of the meetings for fund managers is not related to their investment decision making but to the claims of superior knowledge made to clients in marketing their active fund management expertise. Our findings suggest a disconnect between economic theory and economic policy based on that theory, as well as a corresponding limitation in research studies that test information-usefulness by assuming it to be synonymous with price-sensitivity. We draw implications for further research into the role of tacit knowledge in equity investment decision-making, and also into the effects of the principal–agent relationship between fund managers and their clients.     

Unobservable transfer price exceeds marginal cost when the manager is evaluated using a balanced scorecard

This study investigates the optimal level of transfer prices chosen by managers in a divisionalized firm when they are evaluated based on a balanced scorecard. A unique assumption of our model is that transfer prices are unobservable to a competing firm's managers. In contrast to the findings in several studies that examine strategic transfer pricing, this research shows that a manager who is evaluated using a balanced scorecard chooses a transfer price that exceeds marginal cost given a market competitor in a specific economic environment. This result is caused mainly by our model's assumption that a manager considers the competitor's profit in his/her in decision-making when the objective is to maximize long-term profit. This study makes a significant contribution to the strategic transfer pricing literature by showing that even if the transfer price is unobservable to rivals, the optimal transfer price exceeds marginal cost when the final product market is characterized by price competition, something not shown in previous analytical accounting research.     

RECENT AND FUTURE MANAGEMENT CHANGES IN LOCAL GOVERNMENT: CONTINUING FOCUS ON RATIONALITY AND EFFICIENCY?

Dutch municipalities and provinces have recently introduced many changes relating to management control. This paper explores the role of economic and social rationality in the introduction of reforms, and the nature of possible future reforms. Based on interviews with politicians and professional managers and on documents, the paper examines experiences with recent management changes. In addition, it discusses ‘change initiating factors’. Budget cuts and trends seem to be such change initiating factors. However, particularly more demanding citizens, increases in voters' volatility and politicians' uncertainty seemed to initiate changes. The paper speculates that in the near future, too, it could be a rational survival strategy for politicians and managers to focus on initiatives that are intended to enhance performance and efficiency.     

Analysts' Roundtable on Integrating ESG into Investment Decision‐Making

In this third of the three discussions that took place at the SASB 2016 Symposium, practitioners of a broad range of investment approaches—active as well as passive in both equities and fixed‐income—explain how and why they use ESG information when evaluating companies and making their investment decisions. There was general agreement that successful ESG investing depends on integrating ESG factors with the methods and data of traditional “fundamental” financial statement analysis. And in support of this claim, a number of the panelists noted that some of the world's best “business value investors,” including Warren Buffett, have long incorporated environmental, social, and governance considerations into their investment decision‐making. In the analysis of such active fundamental investors, ESG concerns tend to show up as risk factors that can translate into higher costs of capital and lower values. And companies' effectiveness in managing such factors, as ref lected in high ESG scores and rankings, is viewed by many fundamental investors as an indicator of management “quality,” a reliable demonstration of the corporate commitment to investing in the company's future. Moreover, some fixed‐income investors are equally if not more concerned than equity investors about ESG exposures. ESG factors can have pronounced effects on performance by generating “tail risks” that can materialize in both going‐concern and default scenarios. And the rating agencies have long attempted to reflect some of these risks in their analysis, though with mixed success. What is relatively new, however, is the frequency with which fixed income investors are engaging companies on ESG topics. And even large institutional investors with heavily indexed portfolios have become more aggressive in engaging their portfolio companies on ESG issues. Although the traditional ESG filters used by such investors were designed mainly just to screen out tobacco, firearms, and other “sin” shares from equity portfolios, investors' interest in “tilting” their portfolios toward positive sustainability factors, in the form of lowcarbon and gender‐balanced ETFs and other kinds of “smart beta” portfolios, has gained considerable momentum.     

Firm's demand for insurance: An explorative approach

This paper addresses the question, what influences the insurance demand of companies and examines the influence of managerial risk aversion in this decision process. An explorative research approach based on qualitative data analysis is applied to explore the factors influencing the insurance related decision behavior in organizations. Using interviews and observations of firm's insurance managers, the results identify interdependencies between factors of insurance demand, such as ownership structure, managerial discretion, volatility of earning, size, services of the insurer, and business diversification which allows to propose a framework of contextual factors affecting company's insurance demand. Within this framework, the data imply managerial risk attitudes as decisive factor in the decision process about insurance demand in companies. This explorative study enriches the existing theories of firms’ insurance demand and addresses feedback from practice into theory.     

Individual psychology of risk-taking behaviours in non-adherence

This paper presents some theoretical considerations based on the theories of risk about non-adherence in the field of health care. Traditional models as the Health Belief Model and the Theory of Reasoned Action are presented and criticized. In order to enable the use of other theoretical frameworks, it is argued that non-adherence can be studied within the general frame of risk-taking. The behavioural decision theory is presented and it is argued that cognitive biases like unrealistic optimism play a major role in non-adherence as in risk-taking. It is also argued that these cognitive biases depend on self-related motivation factors. Results of a pilot study involving 16 patients are presented. These results only partly support the theoretical analysis and underline that it would be necessary to take mood factors into consideration in further research.     

Ethics matters: the integration of ethical considerations in management accounting textbooks

This paper examines the integration of ethical considerations in management accounting (MA) education. Drawing on the work of Alisdair MacIntyre, it is argued that MA instruments such as performance measurement are not morally neutral, but instead bear moral implications. Therefore, this paper contends that MA students should be trained to take these moral implications into consideration alongside MA's technical aspects. A content analysis is carried out to examine the integration of ethical considerations in top-ranked MA textbooks. The findings indicate that these textbooks, particularly the introductory textbooks, marginally integrate ethical considerations. Furthermore, the findings point to the risk of detaching ethical considerations from the discussion of MA's technical aspects, which may weaken the potential of the ethical considerations and turn them into ‘afterthoughts’. Finally, this paper offers practical suggestions for the improvement of the integration of ethical considerations in MA education and concludes with directions for future research.     

To diversify or not to diversify

One of the most challenging decisions a company can confront is whether to diversify. The rewards and risks are extraordinary. Success stories such as General Electric, Disney, and 3M abound, but so do stories of failure-consider Quaker Oats' entry into the fruit juice business with Snapple. What makes diversification such an unpredictable, high-stakes game? First, companies usually face the decision in an atmosphere that is not conducive to thoughtful deliberation. For example, an attractive company comes into play, and a competitor is interested in buying it. Or the board of directors urges expanding into new markets. Suddenly, senior managers must synthesize mountains of data under intense time pressure. To complicate matters, diversification as a corporate strategy regularly goes in and out of vogue. In short, there is little conventional wisdom to guide managers as they consider a move that could greatly increase shareholder value or seriously damage it. But diversification doesn't need to be quite such a roll of the dice, argues the author. His research suggests that if managers consider six questions, they can reduce the gamble of diversification. Answering the questions will not lead to an easy go-no-go decision, but by helping managers weigh risks and opportunities, it can help them assess the likelihood of success. The issues that the questions raise, and the discussion they provoke, are meant to be coupled with the detailed financial analysis usually conducted before a diversification decision is made. Together, these tools can turn a complex and often pressured decision into a more structured and well-reasoned one.     

New Canadian Accounting Standards for Private Enterprises and the Adoption Timing Decision

Prior research into the adoption timing decision of organisations in relation to newly promulgated accounting standards has focused exclusively on public enterprises and used economic cost–benefit frameworks as a main method of analysis. The current study examines the impact of a broader range of factors, including cost–benefit considerations, on the adoption timing decision of private firms with respect to the new set of Canadian accounting standards for private enterprises released in 2009. These factors were organised into a coherent framework using the theory of planned behaviour. The survey findings reveal that several items related to attitudes towards the behaviour, subjective norms and perceived behavioural control play a significant role in managers’ adoption behaviour. This study provides relevant insights for private enterprise managers, financial statement users, standard setters and academics.     

An Empirical Analysis of Financial and Non-financial Managers' Remuneration in Small and Medium-sized UK Enterprises

This paper examines empirically the influences on managerial remuneration in a sample of 97 UK small and medium-sized enterprises (SMEs). The empirical analysis, based on data obtained from interviews with middle (i.e. non-director level) managers and the published financial records of their employing firms lodged at Companies House, examines the relative explanatory power of a number of human capital, job/firm specific and external labour market variables. In addition, the sample was partitioned into two groups, one comprising 29 financial managers and the other comprising 68 non-financial managers. Separate wage equations were estimated for the two groups to determine whether the factors that influence remuneration differ between the two groups of managers. For the overall sample, the results indicate that the managers' ages, qualifications and previous careers and the size, growth, industry and location of their employing firms are able to explain a large proportion of the variance in remuneration. For the sub-sample analyses, firm profitability, (several aspects of) size, and the managers' career histories are of relatively greater importance in respect of financial managers' remuneration, whilst asset growth, industrial sector and location seem to be of more importance for the non-financial managers. These results are viewed as being broadly consistent with the expectations derived from the extant theoretical and empirical literatures on managerial remuneration.