Is accounting a global or a local discipline? evidence from major research journals

Accounting research is torn between two competing forces. On the one hand, a quest for general results and internationalization of financial markets calls for a global approach and international co-operation. On the other hand, domestic institutional settings call for research that deals with the relevant problems of the existing accounting systems. In this paper we address the issue of how global or local the accounting research community currently is through an analysis of empirical studies published by six leading English language accounting research journals from the U.S.A., Europe and Australia, during the period 1984–1993. Our findings indicate that accounting still is a rather local discipline by nature: both empirical evidence and authors are significantly clustered along country lines. We find that 77% of papers fall in a category where the origin of the researcher, data and the journal, is the same. Especially there is a close link between the origin of the researcher and that of the data. The interpretation of the empirical findings lead us to a view of competing research élites. A powerful and currently dominating U.S. academic élite is centred around The Accounting Review, the Journal of Accounting Research and the Journal of Accounting and Economics; and an emerging, mostly European élite around Accounting, Organizations and Society. The functioning of research élites produces competing quality criteria which are intertwined with methodological and cultural issues. The emerging “policentric oligarchy” of research élites helps to remove institutional barriers to the knowledge production process and offers legitimate outlets for a wider range of approaches.     

Reconsidering performance evaluative style

Journal of Accounting Research, 10, 156–182, modeled “performance evaluative style” as the predictor of unintended effects from performance measurement control systems, stimulating one of the few areas of cumulative research in behavioral accounting. However, despite twenty-five years of empirical testing, this stream of research has failed to converge. This paper considers the validity issues created by evolution in the conceptualisation and specification of the relevant variables and classifies them by calculation type. Results of an empirical test designed to explore comparability between the variable types are reported. Finally, implications for interpreting prior research and for future research directions are considered. ©     

A comparative analysis of the construct validity of coefficients in paramorphic models of accounting judgments: A replication and extension

This study adds to research which examines the construct validity of coefficients of cue importance in studies concerned with how decision-makers use accounting information in formulating judgments (see Larcker & Lessig, The Accounting Review, January, 1983, pp. 58–77; Selling & Shank, Accounting, Organizations and Society, 1989, pp. 65–77). Historically, accounting studies have modelled cue importance with almost exclusive reliance upon linear models. But as the Selling & Shank study indicates, inferring the importance of accounting cues through reliance upon only one kind of model can leave “method variance” undetected and raises threats to the construct validity of coefficients (see Cook & Campbell, Quasi-experimentation: Design and Analysis Issues for Field Settings, 1979, pp. 59–70). To the extent that cue importance appears similar across models, then the model coefficients are presumed more valid. While Selling & Shank compare linear models to process tracing models, we compare a linear model to an eigenvector-scaling routine known as the Analytic Hierarchy Process (see Saaty, The Analytic Hierarchy Process, 1980). As with Selling & Shank, we find that the importance of cues is sensitive to model choice, suggesting that more research is needed into method variance before judgments can be made with respect to the construct validity of linear coefficients in accounting studies.     

Adopting better corporate governance: Evidence from cross-border mergers

Cross-border mergers allow firms to alter the level of protection they provide to their investors, because target firms usually import the corporate governance system of the acquiring company by law. Therefore, cross-border mergers provide a natural experiment to analyze the effects of changes in corporate governance on firm value, and on an industry as a whole. We construct measures of the change in investor protection induced by cross-border mergers in a sample of 7330 ‘national industry years’ (spanning 39 industries in 41 countries in the period 1990–2001. We find that the Tobin's Q of an industry — including its unmerged firms — increases when firms within that industry are acquired by foreign firms coming from countries with better shareholder protection and better accounting standards. We present evidence that the transfer of corporate governance practices through cross-border mergers is Pareto improving. Firms that can adopt better practices willingly do so, and the market assigns more value to better protection.     

The future of Muslim politics : Critique of the ‘fundamentalist’ theory of the Islamic state

This article considers the future of Muslim political thought in the context of growing de-Islamization and the dominance of Western institutions. The ‘fundamentalist’ theory of the Islamic state—total mobilization of Muslim societies under a universal state—is criticized as religiously an immanentist heresy, and politically a totalitarian nightmare. Proposed here is a way out of the moral and intellectual crisis in Islamic political thought through the principle of Shura—meaning that Muslims must evolve their own form of representative government.     

The role of budgets in organizations facing strategic change: an exploratory study

Recent attention in the general management literature has focused on mechanisms and processes used by organizations to respond and adapt to changes in their operating environment. There is, however, very little broad-based empirical research examining the role that management accounting control systems can play in shaping organizational change. Much of the empirical research to date has focused on the role of accounting as a diagnostic tool for assessing and rewarding managerial performance despite the recognition that accounting can serve as a dialogue, learning and idea creation machine (Burchell et al., 1980. Accounting Organisations and Society 5,5–27). The purpose of this study is to explore how accounting can serve this alternative role. We use (Simons, R. 1990.) Accounting Organisations and Society 15, 127–143). interactive/diagnostic classification of management control systems to capture how accounting can be used as a learning machine in the formulation and implementation of strategic change. A theoretical model is developed to examine the relationship between strategic change, style of budget use and performance. It is argued that an interactive style of budget use can mitigate the disruptive performance effects of the strategic change process. The data, collected from Chief Executive Officers in 63 public hospitals, provide results that are consistent with our expectations.     

Accounting for decisions and decisions for accounting

Behavioral decision theory (BDT) is concerned with “accounting for decisions”. The development of this interdisciplinary field is traced from the appearance of several key publications in the 1950s to the present. Whereas the 1960s saw increasing theoretical and empirical work, the field really started to flourish in the 1970s with the appearance of the review by Slovic & Lichtenstein (Organizational Behavior and Human Performance, pp. 549–744, 1971), and key papers on probabilistic judgment (Tversky & Kahneman, Science, pp. 1124–1131, 1974), and choice (Kahneman & Tversky, Econometrica, pp. 263–291, 1979). From the early 1980s to the present, BDT has seen considerable consolidation and expansion and its influence now permeates many fields of enquiry. After this brief history, eight major ideas or findings are discussed. These are: (1) that judgment can be modeled; (2) bounded rationality; (3) to understand decision making, understanding the task is more important than understanding the people; (4) levels of aspiration/reference points; (5) use of heuristic rules; (6) the importance of adding; (7) search for confirmation; and (8) thought as construction. Next, comments are addressed to differences between BDT and problem solving/cognitive science. It is argued that whereas many substantive differences are artificial, two distinct communities of researchers do exist. This is followed by a discussion of some major shortcomings currently facing BDT that include questions about the robustness of findings as well as overconcern with a few specific, “paradoxial” results. On the other hand, there are many interesting issues that BDT could address and several specific suggestions are made. Moreover, these issues represent opportunities for accounting research and several are enumerated. Finally, BDT presents “decisions for accounting” in the sense that scarce resources need to be allocated to different types of research that could illuminate accounting issues. The argument is made that BDT is one research metaphor or paradigm that has proved useful in accounting and that should be supported. Such support, however, may mean that some researchers may work on issues that, at first blush, might seem distant from accounting per se.     

The interplay between professional groups, the state and supranational agents: Pax Americana in the age of ‘globalisation'

In response to recent calls for systematic and in-depth studies of the impact of international forces on local accounting practices, discourses and institutions, this essay explores the interconnectedness of national politics with global forces and the ramifications of this interaction for the regulation of accounting and the state–profession relationship. The paper employs Held's (1991) framework [Held, D. (1991). Democracy, the nation-state and the global system. Economy and Society, 20(2), 138–172.] on the role of the nation state in the age of globalisation, extended to encompass insights from the realist paradigm on international politics, to examine the international aspects of an attempt by a group of indigenous auditors in Greece to recapture their monopoly status, following the ‘liberalisation' of the Greek auditing profession in 1992. The paper explores changes in the state–profession relationship in the era of ‘globalisation' and documents the catalystic role of major states (the USA), politico-economic blocks (the EU), and other powerful international actors. It is posited that the politics of international accounting professionalism in the ‘globalisation' era are becoming more polycentric with (lesser) nation-states as merely one level (of diminishing importance) in a complex system of superimposed, overlapping and often competing national and international agencies of governance. The lessons to be learned from the Greek experience seem to be relevant to a number of countries — weaker or more important players in the world economy and politics — as they realign the assemblage of government in accounting and in other domains, in response to the progressive internationalisation of the world economy.     

What does organizational change mean? Speculations on a taken for granted category

Despite widespread research on why and how organizations change, what constitutes change is often taken for granted. Its definition is avoided. Studies based on individuals’ rational choice imply that change flows from purposive actions in accordance with an objective, external reality whereas contextualism argues that change results from institutional pressures, isomorphisms and routines. But both depict change as the passage of an entity, whether an organization or accounting practices, from one identifiable and unique status to another. Despite their differences over whether reality is independent, concrete and external, or socially constructed, both assume that actors (or researchers) can identify a reality to trace the scale and direction of changes. This reflects modernist beliefs that organizational space and time are unique and linear. The paper takes issue with this and argues that ‘a-centred organizations’ and ‘drift’ should replace conventional definitions of organizations and change. The arguments are inspired by the arguments of the sociology of translation and constructivism, and insights from two case studies of Enterprise Resource Planning system implementations in large multinational organizations. The latter illustrate how defining change is problematic—as new systems gave rise to multiple spaces and times within the organizations. The paper traces the implications of this for control and accounting studies tout court.     

OF MESSINESS, SYSTEMS AND SUSTAINABILITY: TOWARDS A MORE SOCIAL AND ENVIRONMENTAL FINANCE AND ACCOUNTING

This essay is a personal attempt at a re-visitation and re-consideration of a number of the fundamental questions which underlie accounting and finance but which only rarely receive explicit consideration. Social and environmental accounting has been the principal focus of my research interests since I became an academic and the subject was, indeed, the primary reason I became an academic in the first place. A concern with social and environmental accounting automatically forces one to raise basic questions about (what is conventionally thought of as) accounting and finance—its foundations, its purposes, its assumptions. In trying to answer those questions one comes to see all of accounting and finance in different ways—both in terms of what it assumes about the world and what it can potentially do for the world. This paper seeks to clarify some of the ways in which conventional accounting and finance and social and environmental accounting (and finance) can be in harmony. However, the principle purpose of the paper is to suggest that many of our ghettos, our internecine squabbles and our misunderstandings are trivial when compared with the essential question of what we place at the centre of our teaching and scholarship. At the core of accounting and finance is a truly fundamental conflict between sustainability and modern international financial capitalism. Our choices between these are likely to be a great deal more than matters of methodological nicety or intellectual convenience. Social and environmental accounting (and finance) offer a way to recover a moral and productive accounting and finance that places survival of the species at its very heart.     

Accounting elites and accounting theory: A reply to Paul Montagna

In response to Paul Montagna's review, the author draws attention to a central claim of Accounting Regulation and Elite Structures: that despite vigorous efforts it is not possible to identify separate schools of accounting thought in Sweden. Instead, what one finds are common bases of reasoning in appeals to “practice”. Consumer-oriented and producer-oriented appeals are identified. It is argued that empirical research is not governed by a Grand Theory. Norms of accounting practice are argued to develop out of the interplay between individuals arguing from points of view they consider to be right. In communicative interaction between individuals representing diverse interests, there is a high likelihood that communication will be distorted. In such situations appeals to the “practicality” of a proposed solution are likely to be successfully made.     

The interaction between national and organizational cultures in accounting firms

This paper reports the results of an empirical study of the interaction between national and organizational cultures at the firm level. Using Hofstede's Value Survey Module, the concept of culture was operationalized in six accounting firms in The Netherlands. Three of these firms were local offices of international “Big Eight” accounting firms with a strong U.S.-orientation in their organizational philosophies and policies, whereas the other three firms were Dutch in origin and organization. All six firms work virtually entirely with Dutch employees. We were specifically interested in any influences of the U.S. culture upon the Big Eight firms. For two Hofstede's four cultural dimensions, i.e. Uncertainty Avoidance and Masculinity, significant effects of the U.S. culture upon the organizational cultures of the Big Eight firms were found. Further analysis showed that these results may rather be due to (self-)selection than to socialization mechanisms.     

Accounting Returns Revisited: Evidence of their Usefulness in Estimating Economic Returns

Accounting information is used for measuring firm performance in various financial applications—a practice supported by empirical studies demonstrating the value relevance of accounting numbers, but disputed by theoretical papers arguing that a firm's accounting rate of return (ARR) serves poorly as a proxy for its internal rate of return (IRR). We derive a new model of the ARR–IRR relation, and describe how the conservatism of GAAP constrains a firm's IRR to fall in a range bounded by its historical growth rate and ARR. Using cross-sectional data, we demonstrate that economic returns can be estimated from accounting numbers for many firms. We link empirical results to underlying economic theory, and thus contribute to understanding why accounting information is value relevant.     

Ranking accounting journals using dissertation citation analysis: A research note

Prior literature on accounting journal rankings has provided different journal lists depending on the type of examination (citations- vs. survey-based) and the choice of journals covered. A recent study by Bonner, Hesford, Van der Stede, and Young (2006) [Bonner, S., Hesford, A., Van der Stede, W. A., & Young, M. S. (2006). The most influential journals in academic accounting. Accounting, Organizations and Society, 31(7), 663–685] documents disproportionately more citations in the financial accounting area, suggesting a financial accounting bias in the accounting literature. We use citations from accounting dissertations completed during 1999–2003 to provide a ranking of accounting journals. The database allows us to assess the research interests of new accounting scholars and the literature sources they draw from. Another innovation is our ranking of accounting journals based on specialty areas (auditing, financial, managerial, tax, systems, and other) and research methods (archival, experimental, modeling, survey, and other). To mitigate the financial accounting bias documented by Bonner et al. (2006), we derive a ranking metric by scaling (normalizing) the journal citations by the number of dissertations within each specialty area and research method. Overall, the top journals are, JAR, AOS, TAR, and JAE. We also provide evidence that top journal rankings do vary by specialty area as well as by research methods.     

The effects of shifts in monetary policy and reserve accounting regimes on bank reserve management behavior in the federal funds market

This paper looks at the effects on Fed fund rates and Fed fund purchasing behavior of large banks resulting from (i) the 1982 regime switch from non-borrowed to borrowed reserve targeting by the Fed and (ii) the 1984 switch from lagged to almost contemporaneous reserve accounting (CRA). Whether we analyse changes in the interest-rate or quantity dimensions, the shift in monetary policy targets appeared to have had a more profound effect on the market for bank reserves than the shift in reserve accounting regime. These results, therefore, tend to support the contention that a shift to CRA by itself will have little effect on bank reserve management behavior unless combined with its logical counterpart — a total reserves target.     

An institutional theory perspective on the DRG framework, case-mix accounting systems and health-care organizations

Case-mix accounting systems have been advanced as both reflecting the economic reality that underlies a hospital's various “product lines”, as defined by DRG prospective payment categories, and facilitating rational decision making regarding resource acquisition, deployment and use. This article uses the institutional perspective to extend this conceptualization of case-mix accounting systems. The institutional perspective proposes that many elements of organizational structure, like case-mix accounting systems, reflect as much a need to conform to societal expectations of acceptable practice as the technical imperative of fostering rationality. This article also extends institutional theory regarding the issues of power and decoupling by considering institutionalization to be an unfinished process in the health-care context, wherein the active agency of individuals and organizations is subjected to systematic examination. In this specific context, case-mix accounting may play a significant role in establishing and perpetuating — not merely supporting — the very social structure of legitimacy, and may consequently be considered an interest-oriented activity having the potential to penetrate and alter the internal operating processes of financially strained hospitals.