JIT performance effects: A research note

This paper uses a sample of 131 just-in-time (JIT) firms and their matched non-JIT firms to examine whether adoption of JIT improves firm performance. Tobin's Q and return on assets (ROA) are used to measure firm performance. Overall, the results indicate that statistically significant differences in Tobin's Q and ROA were observed in a pre- and post-test of JIT adopters and between matched non-JIT adopters.     

The relationship between product diversity, usage of advanced manufacturing technologies and activity-based costing adoption

This paper examines the associations between product diversity, usage of advanced manufacturing technologies (AMT) and activity-based costing (ABC) adoption. Theory strongly suggests that product diversity is a major determinant of the demand for ABC systems. To date, the results of empirical research on the relationship between product diversity and ABC adoption have generally been inconclusive, however, suggesting that there either may be no strong relationship, or that methodological issues may have prevented researchers from consistently finding it. Using a dataset of survey responses from 191 Dutch, medium-sized manufacturing firms, this paper re-examines the relationship between product diversity and ABC adoption. Improving upon the measurement of product diversity and distinguishing between ABC adoption and use, it examines whether the relationship is curvilinear (inverted U-shaped) and/or moderated by usage of AMT. The paper contributes to the literature by showing that, consistent with the underlying theory, product diversity, on average, is positively related to both ABC adoption and ABC use, but also that these relationships are indeed inverted U-shaped and that the relationship with ABC use is negatively moderated by usage of AMT.     

Corporate fraud culture: Re‐examining the corporate governance and performance relation

We analyse the corporate governance and performance relation, when conditioning on corporate fraud, for fraud firms during 2000 – 2007. Fraud firms are identified as either self‐ reported fraud events, or subject to regulatory investigation. We use the inverse Mills ratio procedure to account for firms' (unobservable) fraud culture in the dynamic system GMM model of the performance‐ governance relation. We find that corporate governance is an endogenously determined characteristic that has no causal impact on firm performance when conditioning on fraud. Fraud is a significant regulatory event but its overall economic impact at the firm level is highly variable.     

The role of manufacturing practices in mediating the impact of activity-based costing on plant performance

We study the impact of activity-based costing (ABC) on adoption of world-class manufacturing (WCM) practices and plant performance. In contrast to earlier research that estimates the direct impact of ABC on plant performance, we develop an alternative research model to study the role of world-class manufacturing practices as a mediator of the impact of ABC. Analysis of data from a large cross-sectional sample of US manufacturing plants indicates that ABC has no significant direct impact on plant performance, as measured by improvements in unit manufacturing costs, cycle time, and product quality. We find, however, that WCM practices completely mediate the positive impact of ABC on plant performance, and thus advanced manufacturing capabilities represent a critical missing link in understanding the overall impact of ABC. Our results provide a different conceptual lens to evaluate the relationship between ABC adoption and plant performance, and suggest that ABC adoption by itself does not improve plant performance.     

Technological and organizational influences on the adoption of activity-based costing in Australia

The present paper examines one set of potential reasons for the paradox as to why so few firms have adopted activity‐based costing (ABC) despite the demonstrated benefits of this costing system. A cross‐sectional survey of Australian firms is used to examine the influence of seven technological and organizational factors on firms’ initial interest in ABC and their decision to adopt it or not. The organizational factors of top management support, the support of an internal champion, and organizational size were shown to be associated with initial interest in ABC. The decision to adopt or reject ABC had one organizational factor associated with it, the support of an internal champion.     

Quantification of the high level of endogeneity and of structural regime shifts in commodity markets

We propose a “reflexivity” index that quantifies the relative importance of short-term endogeneity for several commodity futures markets (corn, oil, soybean, sugar, and wheat) and a benchmark equity futures market (E-mini S&P 500), from mid-2000s to October 2012. Our reflexivity index is defined as the average ratio of the number of price moves that are due to endogenous interactions to the total number of all price changes, which also include exogenous events. It is obtained by calibrating the Hawkes self-excited conditional Poisson model on time series of price changes. The Hawkes model accounts simultaneously for the co-existence and interplay between the exogenous impact of news and the endogenous mechanism by which past price changes may influence future price changes. Our robustness tests show that our index provides a ‘pure’ measure of endogeneity that is independent of the rate of activity, order size, volume or volatility. We find an overall increase of the reflexivity index since the mid-2000s to October 2012, which implies that at least 60–70 percent of commodity price changes are now due to self-generated activities rather than novel information, compared to 20–30 percent earlier. While our reflexivity index is defined on short-time windows (10–30 min) and thus does not capture long-term memory, we discover striking coincidence between its dynamics and that of the price hikes and abrupt falls that developed since 2006 and culminated in early 2009.     

Simultaneous effects of clustering and endogeneity on the underpricing difference of IPO firms: A global evidence

This paper provides the first empirical examination of the Entrepreneurial Wealth Losses (EWL) theory in explaining the global underpricing difference while simultaneously accounting for various clustering effects on the endogenous underwriter-underpricing relationship. We carefully evaluate the effect of clustering in standard errors within years, industries, countries, and developed versus developing countries. Employed here is a large global dataset comprising 10,212 IPO-issuing firms from 22 developed and developing countries between 1995 and 2016. Our 2SLS results provide strong evidence relating the existence of dispersion in underpricing in the global IPO market to the three dimensions of the EWL theory. When the degree of ex-ante uncertainty surrounding the time of offering is high, results show that in countries with a high level of IPO underpricing, issuers sell less secondary shares, create less primary shares, and employ less reputable underwriters. After adjusting for the clustering effect, the EWL model fails in cross-country settings and in developing stock markets while it succeeds in developed ones. This is due to the failure to capture the endogenous underwriter reputation-underpricing relationship. We show how ignoring one- and two-way clustering effects in the IPO data influences results. The validity of the EWL model particularly the statistical significance of the endogenous underwriter reputation-underpricing relationship vanishes based on the way we cluster our standard errors. Instead, we uncover conclusive evidence supporting the spinning behavior rationale where prestigious underwriters in developing equity markets burden IPO firms with a hefty underwriting fee. Sequentially, they leave big amounts of money on the table for investors to cash it out at the expense of issuers. Entrepreneurs in developing nations appear not to be concerned by this spinning practice, because they care little about their wealth losses in exchange for securing successful offering. Policy-wise, the paper provides several practical contributions.     

Towards explaining activity-based costing failure: accounting and control in a decentralized organization

Many of the activity-based costing (ABC) systems introduced in recent years are said to fail (e.g. Cooperet al., 1992; Argyris and Kaplan, 1994; Shields, 1995; Roberts and Silvester, 1996). The use of ABC for surveillance by the group management, with no consequent actions, leads us to propose that claims on ABC failure result, in part, from assessing the use and value of ABCs from the decision-making perspective. The decision-making perspective may be insufficient for capturing the multitude of uses to which ABCs are put in practise. As this study shows, in the context of strategic decision-making the success of ABC cannot depend on whether its results require any actions or decisions to be taken, but on its ability to make a correct diagnosis of the situation. Consequently, some of the so-called ABC failures may not be failures. They may merely reflect a limited appreciation of the uses of accounting and control systems in practise. Nevertheless, failures and resistance are real in a number of organizations. This study explored the origins of resistance to ABC in a case setting, looking at diverse interests of organizational stakeholders, and the role of existing control and information systems in ABC implementation. We show that the resistance may have several sources; some related to the cost and benefits of ABC, some associated with organizational power and politics, and some pertinent to organization culture. The practical implication of this study hinged on the notion that although the resistance to ABC may come from various sources, these sources appear fundamentally structural and are unlikely to be dealt with by employing implementation-based strategies.     

Structural models and endogeneity in corporate finance: The link between managerial ownership and corporate performance

This paper presents a parsimonious, structural model that isolates primary economic determinants of the level and dispersion of managerial ownership, firm scale, and performance and the empirical associations among them. In particular, variation across firms and through time of estimated productivity parameters for physical assets and managerial input and corresponding variation in optimal compensation contract and firm size combine to deliver the well-known hump-shaped relation between Tobin's Q and managerial ownership. To assess the effectiveness of standard econometric approaches to the endogeneity problem, we apply those remedies to panel data generated from the model. The unfortunate conclusion is that, at least in the ownership-performance context, proxy variables, fixed effects, and instrumental variables do not generally provide reliable solutions to simultaneity bias.     

Associations between strategic resource importance and performance measure use: The impact on firm performance

This study investigates the relation between managers’ perception of the importance of several types of performance measures and managers’ assessment about the importance of the firm's strategic resources that sustains its competitive advantage. Furthermore, it investigates whether there is a significant association between the importance of performance measures and firm performance, and thus, whether performance measures are mediating variables in the relation between the importance of strategic resources and performance. Using survey data from 107 companies, the results indicate that managers place importance on multiple measures and show some evidence that the importance of performance measures mediates the association between the importance of strategic resources and performance. Implications and insights are discussed, along with ideas for future research.     

Developing time-driven activity-based costing at the national level to support policy recommendations for radiation oncology in Belgium

We use time-driven activity-based costing (TDABC) to estimate the cost of radiation treatments at the national level. Although TDABC has mostly been applied at the hospital level, we demonstrate its potential to estimate costs at the national level, which can provide health policy recommendations. Contrary to work on reimbursement or charges representing the health care system perspective, we focus on resource costs from the perspective of health care service providers. Using the example of Belgian inputs and results, we discuss development of a TDABC model. We also present insights into the challenges that arose during model design and implementation. Finally, we discuss recent examples of policy implications in Belgium as well as some caveats that should be considered when developing resource allocation models at the national level.     

On the relation between corporate governance compliance and operating performance

Better corporate performance has been cited as one of the main benefits of adopting good corporate governance structures within organisations. However, in contrast to theory, a prior European study (Bauer et al., 2004) reports evidence of a negative relationship between corporate governance and corporate performance. This study re‐examines this relationship, and reports evidence of a positive relationship between the extent of compliance with international best practices concerning board structure and functioning and operating performance when operating performance is measured by the return on assets (ROA). This result is robust to controlling for the firms’ compliance with best practices in other governance areas, and holds for some other governance dimensions, namely disclosure of corporate governance and the range of takeover defences. Further tests indicate that greater compliance with international best practices concerning board structure and functioning is significantly associated with reporting less income from asset disposals and that studying a performance measure that includes this item obscures the inherently positive relationship between operating performance and the extent of compliance with international best practices regarding board structure and functioning. The results provide some support for an oftencited motivation for the adoption of good governance practices, and provide explicit evidence that the measure of operating performance is crucial in examining firm‐level operating performance.     

Addressing unobserved endogeneity bias in accounting studies: control and sensitivity methods by variable type

Together with their associated statistical routines, this paper describes the control and sensitivity methods that can be employed by accounting researchers to address the important issue of unobserved (omitted) variable bias in regression and matching models according to the types of variables employed. As with other social science disciplines, an important and pervasive issue in observational (non-experimental) accounting research is omitted variable bias (endogeneity). Causal inferences for endogenous explanatory variables are biased. This occurs in regression models where an unobserved (confounding) variable is correlated with both the dependent (outcome) variable in a regression model and the causal explanatory (often a selection) variable of interest. The Heckman treatment effect model has been widely employed to control for hidden bias for continuous outcomes and endogenous binary selection variables. However, in accounting studies, limited (categorical) dependent variables are a common feature and endogenous explanatory variables may be other than binary in nature. The purpose of this paper is to provide an overview of contemporary control methods, together with the statistical routines to implement them, which extend the Heckman approach to binary, multinomial, ordinal, count and percentile outcomes and to where endogenous variables take various forms. These contemporary methods aim to improve causal estimates by controlling for hidden bias, though at the price of increased complexity. A simpler approach is to conduct sensitivity analysis. This paper also presents a synopsis of a number of sensitivity techniques and their associated statistical routines which accounting researchers can employ routinely to appraise the vulnerability of causal effects to potential (simulated) unobserved bias when estimated with conventional regression and propensity score matching estimators.     

绩效考核中的推定效应

在考评对象的工作绩效不能完全观察的中,人们不得不在绩效考评中引入推定原则。推定原则所带来的基本效应是逆向选择。按照完全理性假定,考评对象按后悔值最小原则确定行为策略。当采用偷懒策略的后悔值小于采用努力策略的后悔值时,绩效工资可能会激励考评对象偷懒和屏蔽工作绩效信息的行为。走出绩效推定情境中的逆向选择的困境的基本思路是提高考评对象采用偷懒策略的后悔值。为此,一方面要提高考评主体认知考评对象实施偷懒策略的概率;另一方面要增大考评对象实施偷懒策略的或有损失。     

The association between ISO 9000 certification and financial performance

This study explores the association between ISO 9000 certification and financial performance at the organizational level in a mature quality initiative market. It extends the limited literature on quality initiatives and objective measures of financial performance. The study hypothesizes that ISO 9000 certification is associated with improvements across three dimensions of financial performance. These dimensions are operating efficiency, growth in sales, and overall financial performance. These dimensions of performance are measured using profit margin, growth in sales, and earnings per share, respectively. Based on data for a sample of 70 companies listed on the Singapore Stock Exchange over a 6-year period, the results of the study are consistent with the hypothesized effects. In particular, the results show that the extent of improvement is driven largely by operating efficiencies and suggests that firms can benefit from ISO 9000 certification if they are genuinely interested in the quality philosophy by improving their internal business processes.     

The decision-influencing use of performance measurement systems in relationships between headquarters and subsidiaries

Although theoretical frameworks assume that performance measurement systems (PMS) can be employed for different uses, there is a lack of prior empirical research examining the use of PMS. In addition, recent International Business studies reveal many unresolved issues about the use of PMS to manage relationships between headquarters and subsidiaries. After summarizing the evolution of the use of PMS over three International Business eras, we focus on the decision-influencing use of PMS, operationalized as the influence of the PMS implemented by headquarters on subsidiaries’ decisions. Based on International Business literature and Management Accounting research, we hypothesize that the subsidiary participation in PMS design, measurement diversity in PMS structure, the linking of PMS to reward, as well as headquarters’ national culture, subsidiary size, and global pressure affect the influence of PMS on subsidiaries’ decisions. We collected data through questionnaires emailed to 100 subsidiaries. Findings show that PMS have a greater influence on decisions in cases of higher subsidiary's participation in PMS design, headquarters’ cultural tolerance for uncertainty, subsidiary size, and global pressure. Contrary to what is contended by advocates of multidimensional approaches to PMS, measurement diversity and the linking of PMS to reward mechanisms do not have a significant impact on the decision-influencing use. We discuss the empirical evidence providing qualitative arguments derived from a focus group, which reveals the existence of a PMS decoupling and helped us to describe four situations with different levels of decision-influencing use of PMS and different economic performance results. The presented quantitative and qualitative empirical evidence offers several insights for research on PMS within multinational companies.     

New Zealand mutual funds: measuring performance and persistence in performance

The present study investigates the performance of New Zealand mutual funds using a survivorship‐bias controlled sample of 143 funds for the period of 1990–2003. Our overall results suggest that New Zealand mutual funds have not been able to provide out‐performance. Alphas for equity funds, both domestic and international, are insignificantly different from zero, whereas balanced funds underperform significantly. There is no evidence of timing abilities by the fund managers. In the short term, significant evidence of return persistence for all funds is observed. This persistence, however, is driven by ‘icy hands’ rather than ‘hot hands’. Finally, we find the risk‐adjusted performance for equity funds to be positively related to fund size and expense ratio and negatively related to load charges.     

The use of performance measurement systems in the public sector: Effects on performance

We study the use of performance measurement systems in the public sector. We hypothesize that the way in which these systems are being used affects organizational performance, and that these performance effects depend on contractibility. Contractibility encompasses clarity of goals, the ability to select undistorted performance metrics, and the degree to which managers know and control the transformation process. We expect that public sector organizations that use their performance measurement systems in ways that match the characteristics of their activities outperform those that fail to achieve such fit. We test our hypotheses using survey data from 101 public sector organizations. Our findings indicate that contractibility moderates the relationship between the incentive-oriented use of the performance measurement system and performance. Using the performance measurement system for incentive purposes negatively influences organizational performance, but this effect is less severe when contractibility is high. We also find that an exploratory use of the performance measurement system tends to enhance performance; this positive effect is independent of the level of contractibility. The effectiveness of the introduction of performance measurement systems in public sector organizations thus depends both on contractibility and on how the system is being used by managers. These findings have important implications, both for practice and for public policy.     

The moderating effects of hierarchy and control systems on the relationship between budgetary participation and performance

This study investigates the moderating effects that an organizational unit's hierarchical level and control systems have on the relationship between budgetary participation and performance. Using moderated regression analyses, we find a three-way interactive effect on performance between hierarchical levels, types of control systems, and budgetary participation. Further analyses reveal that at the high level of a hierarchy, budgetary participation has a positive relationship with performance and this relationship is stronger for organizational units that use output control than for those that use behavior control. By contrast, at the low level of a hierarchy, budgetary participation has a negative relationship with performance and this relationship is stronger for organizational units that use output control than for those that use behavior control.