Causal inference in empirical archival financial accounting research

This study discusses the challenges and opportunities of establishing causal inference in empirical archival financial accounting research. Causal inference requires identification of a theoretically predicted causal mechanism in a research setting optimized to avoid endogenous causes and using a suitable statistical inference strategy. After briefly describing potential research design strategies, I analyze the frequency of causal studies published in leading business and economics journals. I identify causal studies by their abstract including an explicit reference to their causal nature and find that they are significantly more common in the areas of economics and finance compared to other business-oriented research disciplines like accounting. Also, the extent to which research designs are optimized for causal inference differs significantly between causal empirical archival studies in the area of financial accounting and finance. I discuss potential reasons for this gap and make some suggestions on how the demand for and supply of well-designed causal studies in the area of empirical archival financial accounting research might be increased.     

Management accounting practices in Europe: a perspective from the States

I provide a perspective from the States on four questions primarily based on information inManagement Accounting: European Perspectivesedited by Al Bhimani (1996). First, seven factors are identified as having shaped management accounting practices in European nations—academics, education, government, professional associations, consultants, technology, and the inter-nation transfer of information. Second, evidence supports the view that, across European nations, more changes are occurring in management accounting practice terminology and techniques than in the purposes and styles of using management accounting techniques. Third, evidence indicates that there is convergence across European nations in management accounting practices, especially in terminology and techniques, but less convergence in the purposes and styles of using techniques. Fourth, management accounting practices in European nations, particularly terminology and techniques, is converging on a global management accounting practice model. I propose that management accounting practices—particularly terminology and techniques—is converging across nations (at least for those firms that are affected by the global economy)anddiverging across industries both within and between nations.     

Disclosure,conservatism and the cost of equity capital: A review of the foundation literature

In this review piece, we survey the literature on the cost of equity capital implications of corporate disclosure and conservative accounting policy choice decisions with the principle objective of providing insights into the design and methodological issues, which underlie the empirical investigations. We begin with a review of the analytical studies most typically cited in the empirical research as providing a theoretical foundation. We then turn to consider literature that offers insights into the selection of proxies for each of our points of interest, cost of equity capital, disclosure quality and accounting conservatism. As a final step, we review selected empirical studies to illustrate the relevant evidence found within the literature. Based on our review, we interpret the literature as providing the researcher with only limited direct guidance on the appropriate choice of measure for each of the constructs of interest. Further, we view the literature as raising questions about both the interpretation of empirical findings in the face of measurement concerns and the suitability of certain theoretical arguments to the research setting. Overall, perhaps the message which is most clear is that one of the most controversial and fundamental issues underlying the literature is the issue of the diversifiability or nondiversifiability of information effects.     

Research in managerial accounting: Learning from others' experiences

The purpose of this paper is to identify the strengths and weaknesses of three research methods employed in managerial accounting: experimental, survey and field research. We do this by drawing on the three papers published in this issue of the Journal. These three papers provide the reader with a 'behind the scenes' exposé on the problems, choices and decisions confronted by the researcher during the method phase of the empirical study. The complexities associated with method are rarely reported in published papers nor is there any explanation of why effort is devoted to particular methodological issues. It is, however, important for the novice researcher to recognise these choices and problems, both when selecting a particular method, and in designing a study. We attempt to critique these papers in terms of choice of method and also the extent to which each of the studies satisfies the three 'maxims' of scientific method, namely, construct validity, internal validity and external validity. Our review demonstrates the trade-offs that are necessarily made when designing a research study. There are, however, ways in which the effects of these trade-offs can be minimised and we provide guidance as to how the study design might be improved to achieve this.     

Exploring the possibilities for causal explanation in interpretive research

This paper suggests how the contemporary theory of causality, based on the notions of counterfactuality and contrastive thinking, offers helpful direction on how to generate plausible causal arguments in interpretive research. For an interpretive researcher, this opens a route from rich emic accounts to thick explanations; however, only if he/she so wishes and the research question so requires. Perhaps with some surprise, causality can be included in interpretive research framings without compromising the unique features of such research – actually by even building on some of its strongholds. Examples from interpretive management accounting research will illustrate the message of the paper.     

Total accounting in action: reflections on sten Jönsson’s Accounting for Improvement

Sten Jönsson’s recent book Accounting for Improvement (1996) examines organizational change processes based on several in-depth case-studies, conducted during a period of about ten years. In this review essay the arguments of the book are placed alongside recent discussions on management accounting practices, which have increasingly discovered the “hidden” potential of accounting and accountants. Jönsson’s book offers exciting insights into organizational improvement processes, which are linked to accounting in a particularly broad, “total accounting” sense. The major limitation of the book is held to be that it places accountants in the background of the analysis, perhaps reflecting problems in empirical research designs of the case-studies. As a result, the relationships and communication patterns between accountants and line personnel remain largely unexamined.     

Lies,Damned Lies and More Statistics: The Neglected Issue of Multiplicity in Accounting Research

The problem of ‘multiplicity’ (and selection) is considered by many statisticians to be among the most difficult and important problems they face. It includes such areas as multiple tests, variable selection in regression analysis, subgroup analysis and data mining. It undermines statistical inference by inflating type I errors well above reported levels of significance. The basic issue confronting researchers is how to adjust inferences to allow for multiplicity, particularly in exploratory or model-building analyses where standard textbook probability calculations associated with estimation and hypothesis testing do not apply. Despite its importance, and unlike what occurs in other disciplines, the multiplicity problem receives little or no attention in accounting. This situation is of concern because survey results suggest that serious type I error inflation is a real possibility in management accounting. In attempting to remedy this situation, the paper adopts a classical statistical framework for the purpose of examining the key issues underlying the problem and to present some strategies for dealing with it. These strategies offer the researcher a reasoned approach that recognises the possibility that the observed results may be due to chance, as well as the possibility that they are real. The discussion also highlights the fact that the only way to deal with the issue of multiplicity successfully is to repeat results on new data.     

会计实验研究对额外变量的控制

实验研究是对相关会计行为进行研究的主要方法之一.通过对变量之间因果关系的揭示,能够充分说明会计行为、会计判断的内在规律.但在研究中,不仅存在着可由实验者控制的能够对被试反应产生影响的变量,还有一些不用于研究目的却也会对被试反应产生影响的变量,即为额外变量,需要对其进行消除或控制.可以认为,会计实验研究的成败与研究者对额外变量的控制效果密切相关.本文通过对会计实验研究中额外变量的不同控制方法进行分析和说明,使实验研究者可以明确如何在会计相关研究中对额外变量进行有效控制,进而有效提高实验的效度.     

Inflation,Output Growth,and Their Uncertainties: Empirical Evidence for a Causal Relationship from European Emerging Economies

In this paper, we analyze the causality among inflation, output growth, and their uncertainties in all European countries with emerging economies. For these countries, high uncertainty regarding economic growth during the current economic and financial crisis that started in 2008 caused their governments to increase their efforts to sustain growth, and to maintain a low level of inflation. Of the twelve possible hypotheses regarding the causal relationships among inflation, output growth, and their uncertainties, we consider five relationships for which we find strong theoretical arguments and empirical evidence in the literature. The empirical evidence strongly supports the Friedman-Ball hypothesis that inflation Granger-causes inflation uncertainty. For the other four tested hypotheses, fewer significant causal relationships are obtained.     

Continental European accounting model and accounting modernization in Germany

Classification techniques based on one or few dimensions are widely used in research studies and textbooks to explain and predict the development of accounting systems internationally. However, their usefulness in international accounting has been limited in today's globalized world. For example, in the context of the EU, IFRS are required for consolidated accounting, while national accounting systems continue to be the dominant system for unconsolidated accounting in many countries. Using Germany as a case study, the objective of this paper is to examine whether Germany can still be classified within the Continental European model of accounting following the Act to Modernize Accounting Law (Bilanzrechts-modernisierungsgesetz — BilMoG), which was promulgated on May 29, 2009. This Act introduced some major reforms to the German Commercial Code (Handelsgesetzbuch — HGB), such as removing the close connection to tax rules and introducing new recognition and valuation regulations, which changed traditional principles of orderly accounting (Grundsätze ordnungsmäßiger Buchführung). As a result, the current German approach of financial reporting separates Germany from the traditional Continental European model of accounting and moves it somewhere on a spectrum between the traditional Continental European model of accounting and the Anglo-American model of accounting.     

Bridging the gap between accounting and finance

I suggest that the separation of the academic disciplines of accounting and finance has had some detrimental consequences for the development of research and practice in both disciplines, and especially in finance. I argue that an understanding of financial statement numbers and the accounting principles on which they depend – the accounting microstructure – can be important in developing better valuation and asset pricing models and in identifying relevant dimensions of risk. Therefore finance research can benefit from assimilating recent advances in accounting research. Similarly, accounting research relevant to valuation and asset pricing can benefit by adopting theoretical perspectives and empirical methods from finance research.     

Twenty-one years of social and environmental accountability research: A coming of age

This study extends upon previous research into the profile and direction of social and environmental accounting research, analysing and critiquing 21 years of contemporary research in social and environmental accounting published particularly in four leading interdisciplinary accounting research journals covering the period 1988-2002 inclusive. It reflects upon selected seminal papers on the field, and presents an empirical analysis of SEA publication that updates Parker's (2005) findings. The prospect of a sharing of the territory between critical and managerialist approaches is envisaged, along with the application of multiple theoretical lenses. Social and environmental research show signs of more recent balancing between these two subject areas, while recent shifts in methodological approaches are increasingly emphasising the employment of content analysis/statistical relationships research and case/field/action/ethnograpic research. National practices/comparisons and regulations are leading topic areas occupying researchers. External disclosure, attitudinal studies and theoretical framework papers also attracted significant attention. The paper also overviews emerging research in three non-Anglo-Saxon countries and identifies leading and emerging scholars in the field. The SEA field exhibits considerable momentum, but is found to be largely driven by research and publishing infrastructure outside North American economics focussed research communities.     

Understanding management accounting practices: A personal journey

This paper reviews the changes which have taken place in management accounting research over the last 35 years. It traces the author's personal journey as a management accounting researcher and emphasises the shift which has taken place in what it means to understand management accounting practices. It argues that to make sense of diversity in management accounting practices we need to understand the complex mish-mash of inter-related influences which shape practices in individual organisations. It outlines the contribution which institutional theories can make to understanding this mish-mash of complexity. In particular, it reviews the achievements of the Burns and Scapens framework (2000) for studying management accounting change and describes some of its limitations and extensions; viz., the interplay of internal and external institutions; the importance of trust in accountants; the impact of circuits of power; and the need to study the role of agency in institutional change. It concludes that research in recent years has provided a much clearer understanding of the processes which shape management accounting practices; but the challenge for the future is to use this theoretically informed understanding to provide relevant and useful insights for management accounting practitioners.     

Mandated accounting changes and debt covenants: The case of oil and gas accounting

The relationships among mandated accounting changes, bond covenants and security prices has been the focus of several studies. These studies have provided mixed evidence on the existence of a bond covenant effect on security prices. This paper suggests that inconclusive prior results are a consequence of inappropriately measuring the default risk of debt. Using an option pricing framework, it is shown that the debt to equity alone is not an adequate measure of default risk. In particular, both the debt to equity ratio and the total risk of the firm are necessary to adequately model the bond covenant effects of an accounting change. These theoretical propositions are supported by the empirical analysis of the security market reaction to changes in oil and gas accounting.     

Discussion of empirical research on accounting choice

This discussion considers four aspects of the survey paper on empirical accounting choice research by Fields, Lys and Vincent: implications of the authors’ selection of an expansive definition of accounting choice and their decision to classify this research by managerial motives; implications of the authors’ decision to include implementation decisions in their definition of accounting choice; implications of the authors’ call for research on the consequences of accounting choice, including the costs of defective accounting choices and the benefits of superior choices; implications of the authors’ call for a reconsideration of research designs that explicitly consider groups of accounting choices.     

The role of accounting disaggregation in detecting and mitigating earnings management

Though ample empirical evidence alludes to the importance of disaggregated accounting data in the context of earnings management, extant theory considers biases in reporting mostly at the aggregated level of the accounting report. By introducing accounting disaggregation into the conventional theoretical framework of earnings management, this study highlights the essential role that disaggregated accounting data play in detecting and mitigating reporting manipulations. Disaggregated reports are shown to be especially effective when they consist of accounting items that are tightly interrelated by their fundamental economic nature, differ considerably in their sensitivity to reporting manipulations, and vary in their signs.     

The societal relevance of management accounting: An introduction to the special issue

This essay introduces the special issue of Accounting and Business Research exploring the societal relevance of management accounting and locates the individual contributions within this research agenda. In contrast to prevailing, managerialist conceptions of relevance, the discussion is guided by an over-riding ambition to turn management accounting research “inside out” to examine the effects of management accounting practices on a broader range of constituencies and interests in society and the formation of such practices beyond individual organisations. I start by charting the development of extant and emerging debates on the relevance of management accounting research and practice and then outline some pertinent research themes worthy of further exploration. In doing so, I pay particular attention to emerging research illustrating how management accounting becomes implicated in the external regulation and governance of organisations, the shaping of markets and the wider, societal consequences of such processes. I also discuss some theoretical and methodological implications of exploring such topics.