Why is research on management accounting change not explicitly evolutionary? Taking the next step in the conceptualisation of management accounting change

In this article we discuss the evolutionary foundation of the OIE-guided management accounting change research building on the framework of [Scapens R.W. 1994. Never mind the gap: towards an institutional perspective on management accounting practice. Management Accounting Research, 5, 301–321.] and [Burns, J. and Scapens, R.W., 2000. Conceptualizing management accounting change: an institutional framework. Management Accounting Research, 11, 3–25.]. We argue that research on management accounting change should be based on evolutionary theory, but that the full potential of evolutionary theory has not yet been described or used in management accounting research. The conceptualisation and understanding of management accounting change can be improved and expanded if the evolutionary approach is developed beyond the general belief that it describes only small and gradual, often slow, changes. In this article we show that an evolutionary perspective on management accounting change implies that management accounting’s development is explained as the interaction between the evolutionary sub processes of retention (inheritance), variation and selection. Thus, both continuity and change are seen as evolutionary outcomes. These processes follow the cumulative causality that Charles Darwin proposed and Thorstein Veblen applied to the social sciences. Such a comprehensive theory, here labelled Universal Darwinism, must, however, be given substance with supporting details.     

On the convergence of management accounting and financial accounting – the role of information technology in accounting change

In this article we theorize and conceptualize the recent convergence of management accounting (MA) and financial accounting (FA) with the advancements in information technology (IT), and explicate not only how this convergence is manifested in the technical and technological domain, but also how it is reflected in their convergence at the behavioral and organizational level.Drawing on the analytical model by Hemmer and Labro (2008), in which the forward-looking perspective of FA leads to forward-looking MA, we build a conceptual framing to analyze this convergence. According to this framing, information technology (IT) serves as a facilitator, catalyst, motivator, or even an enabler for the convergence of MA and FA. We further argue that convergence is a much broader phenomenon than claimed by Hemmer and Labro. It firstly covers the technical and technological domain, including the intentional integration of information systems and software, as well as the intentional combination of methods or standards, extending thereafter to the behavioral and organizational domain with the (un)intentional alignment regarding both functions and processes as well as the (un)intentional convergence regarding both work and roles. The applicability of this conceptual framing is illustrated with a set of examples.We present illustrations of the manifestations and outcomes of convergence in both the technical and technological domain (related to accounting standards, discretionary reporting, performance measurement, transfer pricing, competitor, customer and contractor analysis, due diligence in M&As), and the behavioral and organizational manifestation domain (related to accounting processes, work and the role of accountants, incentive systems, accounting and control in multinational companies, the control of business networks, the board of directors and venture capitalists). Based on our observations, we conclude that the forward-looking FA elements are often intertwined with MA, and vice versa, and that convergence in the technical and technological domain appears to precede convergence in the behavioral and organizational domain. In most of our observations, IT plays an important or even crucial role in this convergence process. In the light of these convergence observations, we open several avenues for further research.     

The validity of management accounting language games – A pragmatic constructive perspective

To support the development of a pragmatic practice-based theory for management accounting, practice theory offers valuable avenues for understanding the development, role, and effects of tools and techniques used by practitioners. Scholars have identified communication as a critical dimension for analysis, as discourse can govern the production of knowledge and power structures. However, previous research has mainly focused on the role of actors within static environments; how actors justify their actions and goals, compared with other actors; and how they are aligned with or justify new practices relative to existing practices. The pragmatic constructivist framework that underpins this special issue builds on this research but recognises that previous research has paid little attention to how people—when interacting within a dynamic environment—develop and create new types of constructive causality. Importantly, the necessary conditions for people's actions to construct what they intend to remain largely unexplored. Pragmatic constructivism is founded on the recognition that any theory of management accounting must include conceptual devices representing the notion of success, as well as techniques for evaluating the truth aptness of local practices of reality construction, such as those represented by managemen accounting. This special issue aims to theoretically and empirically explore the potential in management accounting for the measurement and governance of constructed causality. The central topic is the role of management accounting in supporting individual and collective actors to effectively construct causal chains that make organisations work. The three articles in this special issue adopt different approaches to combining the pragmatic constructivist framework with additional theoretical frameworks, as well as using different research methodologies. The papers' findings point to the importance of co-authorship in the creation of functioning organisational practices, and suggest that this might be threatened by information technology. Co-authorship involves language games in the form of dialogical interaction between the accountants and other involved actors. This process develops a shared understanding anchored in a fusion of conceptual models that is tied to individual collaborators' local practice.     

Back to the future: New potential for structuration theory in management accounting research?

For three decades, the use of structuration theory has made a distinctive contribution to management accounting research. A recent development of the theory by Stones [Stones, 2005. Structuration Theory. Palgrave Macmillan, Basingstoke] advocates a move away from the relatively abstract concepts evident in the work of Giddens, towards providing more concrete constructs that give epistemological and methodological guidance to researchers in the field. In order to achieve this, he recommends deployment of the concept of position–practices, combined with use of a quadripartite model of structuration. The main purpose of this paper is to examine the potential of this development for management accounting research. We do so by setting it within our own skeletal model of the structuration process, and then using it to analyse a case study of management accounting practices in a privatised utility company. We conclude that investigation of position–practices focuses attention on the strategic conduct of agents, the importance of power in social interaction, and a plurality of structures and theories of action. But, whilst the quadripartite model highlights the phenomenology, hermeneutics and practices of agents, we note that it provides few direct insights into the processes of reproduction, learning and change in management accounting. We suggest this limitation can be overcome by using structuration theory in a flexible manner, drawing inspiration from other theoretical perspectives which ascribe central roles to path dependency, contradiction and praxis.     

Accruals and ‘accounting numbers management’ in UK executive agencies

Public sector reforms have implemented business techniques, including management by results, cost management and accrual accounting, to make public entities more efficient and accountable. As a consequence, ‘accounting numbers management’ has become a way for managers in the public sector to adapt accounting figures to their interests. This study focuses on ‘earnings management’ (manipulation of earnings) in government agencies. The authors provide evidence of earnings management in which agencies try to keep net operating costs to around zero. The authors' findings question the effectiveness of financial targets associated with accrual-based measures.     

Overcoming the subjective–objective divide in interpretive management accounting research

Methodological debates in accounting frequently emphasise the distinction between objective and subjective research. A growing body of interpretive management accounting studies, often based on fieldwork, is continuing to develop approaches that seek to overcome that distinction by exploring the various ways in which accounting can become part of the contexts in which it operates.     

Can ethics be taught in accounting?

This paper extends the work of accounting educators and researchers who have sought to develop and implement effective ethics interventions in the accounting curriculum. Its purpose is to assess the influence of ethics interventions, integrated into a one-semester introductory auditing course at both the undergraduate and graduate level, on the moral development and ethical behavior of accounting students. Ethics interventions were based on the review and discussion of ethics cases following a well known pedagogical framework over the first 10 weeks of one academic semester. The effectiveness of these interventions was tested two ways. First, using the Defining Issues Test (DIT) and a pre/post-test research design, the moral development of accounting seniors and graduate students in four separate auditing classes was assessed. Second, students' unethical behavior, defined as excessive “free-riding” on an economic-choice experiment based on the Prisoners' Dilemma, was observed by the researcher. In summary, results of this study show that ethics interventions did not cause accounting students' level of ethical reasoning to develop (increase) and did not curtail students' free-riding behavior. Findings also provide evidence of an association between ethical reasoning and students' economic choices, where students with relatively low and high levels of ethical reasoning were most likely to engage in free-riding. The implications of these findings are discussed in the last section of the paper.     

An accounting revolution? The financialisation of standard setting

This paper analyses the political-economic content of the recent ‘revolutionary’ shift in financial accounting rules for listed companies, specifically the rise of IFRS and fair value. It connects this shift to the socio-economic changes that are currently being discussed in the literature on financialisation, e.g. the rise of shareholder value and the proprietary view of the firm. Two ideal-typical accounting systems are constructed on the basis of normative accounting theory and extant standards – historical cost accounting (HCA) and fair value accounting (FVA). The ‘accounting revolution’ of the past 10–15 years can be understood as a qualitative shift from HCA to FVA. It is further argued that these ideal-typical systems are related to different circuits or forms of capital – productive and money capital respectively – and to the particular perspective that these afford on the, capitalist firm. Inasmuch as financialisation is related to the circuit of money capital one can make sense of the rise to prominence of FVA, which represents the dominance of a financial view of the firm in the field of financial accounting. Throughout this paper, however, the limits to financialisation are also highlighted and traced back to the ineradicable manifestation of the circuit of productive capital.     

Insights into method triangulation and “paradigms” in interpretive management accounting research

This paper seeks to develop our understanding of method triangulation and research paradigms in interpretive management accounting research. Relying on field illustrations, the paper provides insight into how method triangulation has actually been received within the Finnish management accounting research community. At present, talk can be distinguished from action in method triangulation. Relying further on this insight, the paper discusses the meaning of a “paradigm”. It points out that for the individual scholar the paradigm is not necessarily a coherent, well-reflected philosophical standpoint. Instead, it represents a socio-political assemblage that suggests a “methodological identity” and provides “paradigmatic economies” for the self-interested academic. We also put forward a view on the future of method triangulation and paradigmatic détente more generally.     

The first course in accounting: students’ perceptions and their effect on the decision to major in accounting

Little empirical evidence exists regarding students’ perceptions of the first course in accounting and the effect of these perceptions on deciding whether or not to major in accounting. The purpose of this study is to begin examining student perceptions regarding the first accounting course and how those perceptions relate to selection of accounting as a major. The study separately examines initial perceptions and changes in perceptions over the semester for intended accounting and non-accounting majors, and assesses the association of individual accounting instructors with changed student perceptions. We then examine the relationship between perceptual changes, final grades, and individual instructors on decisions to major in accounting. Responses from 331 introductory financial accounting students from two universities indicate that while intended accounting majors perceived the course more favorably than non-accounting majors at the beginning and end of the semester, both groups exhibited relatively positive attitudes toward the course. However, these attitudes were similarly less favorable by the end of the course for both groups. We also found evidence of the important role individual instructors play regarding changing student perceptions and selection of accounting as a major. The analyses for selection of accounting as a major indicate that the decision depended on initially intending to major in accounting, performance in the first course, and individual instructors, but not on changes in perception regarding the first course.     

Does management accounting mediate the relationship between cost system design and performance?

This study aimed at investigating the mediating effect of management accounting practices (MAPs) upon the association between cost system design (CSD) and performance. Covariance-Based Structural Equation Model methodology was applied to investigate the complex relationship between the latent constructs. The findings indicated that cost system design alone does not impact firm performance. However, it affects performance via MAPs. We projected that MAPs play a full mediating role between CSD and performance. Thus, this study indicates that incurring high costs for the establishment of a functional cost system might be justifiable, on condition that the firm will utilize the obtained cost data through various decision-making tools; otherwise there is no point in bearing the cost of building such a system.     

Publishing in accounting journals: A fair game?

Publication in the social sciences appears to have evolved into a game, played by four parties: the author, the reviewers, the editor and the bureaucrats using the simple criterion that a quality researcher publishes in quality journals. Acceptance rates for top quality journals now hover around the 10% mark. Something cannot be right with a system which creates so much apparent waste. Either too many authors are submitting substandard articles or too many reviewers are setting unrealistically high hurdles over which authors have to jump. Most of the literature has focussed on the unrealistically high hurdle rate explanation and also on the fallibility of reviewers and editors. The aim of this paper is to explore the issues of low acceptance rates as well as an increasingly lengthy publication process. The paper considers what is the purpose of publishing in academic journals and what are the motivations of authors, reviewers and editors. In order to inform both authors and reviewers of best practice, a summary of the extensive literature is given in the Appendix. The paper concludes with a survey of the suggestions that have been made to improve the publishing process in order to link back to the original purpose of publishing, that of communicating important results to inform public debate on major issues.     

Opening the black box of management accounting information exchanges in buyer–supplier relationships

The purpose of this paper is to explain the reasons why collaborating firms “open their books” and share management accounting information. We investigate the effect of variables related to the tasks and relationships of single individuals of the partner firms (i.e., task interdependence and analysability, team interdependence and relationship duration) on open book accounting (OBA). Our model controls for firm-level variables (i.e., asset specificity, degree of economic dependence, contract presence, contract comprehensiveness, and firm size) known to influence management accounting information exchanges. By using social network analysis (SNA), the data collected from a fashion firm and its entire set of suppliers shows that the quantity of management accounting information is positively related to task interdependence while having an inverted U-shape relation with the duration of the relationship. In addition, it provides evidence of a positive association with task analysability, whereas we find no relation with team interdependence. The analysis also confirms the importance of firm-level factors in explaining the exchanges of management accounting information. Our conclusions have important implications for the design of OBA in inter-organisational relationships.     

The ‘performativity thesis’ and its critics: Towards a relational ontology of management accounting

This paper explores accounting's mediating role in bringing theoretical statements from economics into life. It addresses the so-called performativity thesis that claims that economic theory does not just observe and explain a reality, but rather shapes, formats and performs reality. Accounting mediates in that process by creating cognitive boundaries that embed societal practices in economic theory. However, the performativity thesis is not without criticisms. Its main criticisms concern a lack of proof of the thesis; an overestimation of the power of economics to extend beyond the virtual; and a lack of a critical stance. In order to bring more nuance in the discussion on the performativity thesis the paper reflects on evidence from the field of accounting. The review of accounting studies reveals how accounting, to different degrees, is implicated in strategic and operational activities in markets and organisations and how it is a performative mechanism of economisation. Moreover, in order to accentuate the ‘good’ in society and to challenge the ‘bad’, the paper suggests a further development of (critical) management accounting research into the performativity of both economics and other social theories. A relational ontology of management accounting that is in politics and that is sensitive to ‘unlocalisable’ virtual powers of social-historical formations of management accounting may be developed.     

Why do CFOs become involved in material accounting manipulations?

This paper examines why CFOs become involved in material accounting manipulations. We find that while CFOs bear substantial legal costs when involved in accounting manipulations, these CFOs have similar equity incentives to the CFOs of matched non-manipulation firms. In contrast, CEOs of manipulation firms have higher equity incentives and more power than CEOs of matched firms. Taken together, our findings are consistent with the explanation that CFOs are involved in material accounting manipulations because they succumb to pressure from CEOs, rather than because they seek immediate personal financial benefit from their equity incentives. AAER content analysis reinforces this conclusion.     

How do institutional investors influence accounting conservatism in China?

Using a sample of Chinese listed firms from 2003 to 2015, we find that domestic mutual funds have negative effects while qualified foreign institutional investors (QFIIs) have positive effects on firm accounting conservatism. These effects become stronger when their ownerships are closer to that of the controlling shareholder, respectively. Furthermore, these results are more pronounced when institutional investors are more able to monitor managers and compete with controlling shareholders. Our findings suggest that the influence of institutional investors on accounting conservatism in China is subject to their identities as well as the control contestability against the controlling shareholders.     

Changes in accounting estimates: An update of priors or an earnings management strategy of “last resort”?

Evidence from prior research is mixed about whether accounting estimate changes are strategically motivated, on average, or whether they reflect new or updated information. To interpret this difference, we investigate, by category of material changes in accounting estimates, the association between estimate changes and subsequent restatements. We also explore the determinants of both income-increasing and income-decreasing estimate changes for different categories of estimate changes. We find that the motivations for and the determinants of estimate changes depend on the type of change and on whether the changes in estimates are income-increasing or income-decreasing. Overall, we conclude that when companies are motivated to bias earnings and they cannot do so by manipulating other within generally accepted accounting principles (GAAP) accruals, they sometimes resort to using estimate changes. Our more detailed investigation of estimate changes at the account level suggests a more nuanced view of the determinants of changes in accounting estimates. We develop a more complete model of the determinants of changes in accounting estimates than those used in this emerging literature, which should be of interest to accounting academics, regulators, audit practitioners and audit committee members.     

Is there a gender gap in CEO compensation?

The gender pay gap generates significant political and social debate. This study contributes to this discussion by examining if a gender pay gap exists at the highest level of corporate management, the CEOs. While previous studies have documented a gender pay gap for most levels of executives the findings with respect to CEOs are conflicting. In this paper we focus only on CEO's as it is the most homogenous of executive roles and does not require us to assume that executives with similar titles undertake identical roles. Our evidence is based on 291 US firm-years for the period of 1998–2010. We do not find any association between CEO pay and gender using both the total sample and a sample matched using propensity scores to control for firm characteristics. These insignificant results hold for total pay, salary and bonuses, and for different matching procedures and econometric specifications. Our results therefore indicate that women who rise through the “glass ceiling” to the level of CEO are remunerated at similar levels to their male counterparts.     

Is there a racial gap in CEO compensation?

Racial gap in corporate leadership has prompted continuous and intense discussions, motivating research into the conditions minorities face after they reach top management positions. We contribute to the ongoing debate in this area by examining the association between CEO race and compensation. We do not find evidence for a significant racial wage gap at the CEO level across various econometric specifications, including total-sample OLS, firm-fixed effects to capture CEO transitions within firm, propensity score matched sample, and instrumental variable analysis. The insignificant results hold for total compensation, cash compensation, and non-cash compensation. Further, there is no consistent evidence of differences in CEO compensation for any of the major racial groups (Blacks, Hispanics, and Asians). Based on our results, we conclude that racial minorities who make it to the CEO position in Corporate America are compensated at similar levels to their Caucasian counterparts.