Making sense of complex data using interactive data visualization

An important role for accountants today is to provide decision support to senior management by assisting them in the analysis of large, complex data sets. Interactive data visualization (IDV) facilitates this process by allowing users to navigate, select, and display data via an easy-to-use interface often used as a component of data analytics. Given the increasing popularity of IDV as a tool for making sense of complex data, it is important that accountants become familiar with and learn how to use this technology. This case provides a hands-on opportunity to organize complex accounting data to create IDVs for decision makers to use. Further, the case enables students to understand the potential impact of IDVs on preparers and users of accounting information. Students will assume the role of a division controller in a hypothetical company and create an IDV to assist the chief executive officer (CEO) in decision making.     

Corporate risk-taking,firm value and high levels of managerial earnings forecasts

We examine the impact of high levels of managerial earnings forecasts, an important form of voluntary disclosure, on corporate risk-taking and firm value. Theory and anecdotal evidence suggest that a policy of high disclosure may reduce managers' willingness to invest in higher-risk, higher-return projects. We first verify, as in prior research, that corporate risk-taking is associated with higher future firm value. We then document a negative relation between firms with high levels of forecasting and corporate risk-taking. Finally, we provide evidence suggesting that high levels of managerial earnings forecasts reduce the positive association between corporate risk-taking and future firm value. Our results are robust to alternative measures of corporate risk-taking and future firm value, and alternative definitions of high levels of managerial earnings forecasts. Our results may be of importance to varying interests as they highlight the potential for high levels of earnings forecasts to inhibit corporate risk-taking and lower firm value.     

An assessment of the psychometric properties of the Perceived Stress Scale-10 (PSS10) with a U.S. public accounting sample

Utilizing a convenience sample of 305 professional staff from seven public accounting firms, this study examined: a) the factor structure of the Perceived Stress Scale-10 (PSS10; Cohen & Williamson, 1988); b) the invariance of its factor structure; c) the scale's reliability; and, d) its convergent and divergent validity. Our analyses support a structure with two primary factors, (General Distress and Ability-to-Cope), which load on a single second order factor, Perceived Stress, regardless of gender. Spearman–Brown reliability coefficients, item-total correlations, and coefficient alphas each supported the reliability of the items loading on the full scale as well as on each of the two primary factors. Collectively, these findings provide compelling evidence in support of the PSS10 as a perceived stress measure for accounting professionals. However, more research is warranted to investigate the efficacy of a reduced six-item version of the instrument.     

Secured debt and managerial incentives

Financial theory holds that firms can control agency costs through the use of short-term and secured debt. We examine the relation between the use of secured debt and the incentive of the manager to increase the risk of the firm, as measured by vega. We find that firms utilize secured debt to a lesser extent when managerial volatility sensitivity is higher. Our results suggest that these same firms employ short-term debt as the primary tool to control risk-shifting. Managers with a high risk appetite avoid secured debt, but appear to do so without compromising the interests of the shareholders.     

Competing technologies and industry evolution: The benefits of making mistakes in the flat panel display industry

This article investigates the post‐entry implications of pre‐entry technological choices made during the uncertain period before a dominant design. Building on work on technological dynamics and organizational inertia, I argue that too early commitments to the winning technology may impede the ability to bring the best product to market, but delaying investment too long limits the ability to accumulate useful knowledge. Using data from the evolution of the flat panel display industry from 1965 to 2005, the study shows empirical support for the two theoretical mechanisms and offers the surprising result that firms starting in the losing technology before switching outperform other firms in terms of product value. Switching, while difficult behaviorally in recovering from failure, both delays difficult‐to‐reverse technological commitments and develops market knowledge. Copyright © 2013 John Wiley & Sons, Ltd.     

Tax avoidance and ex ante cost of capital

This study examines the association between tax avoidance and ex ante cost of equity capital. Based on prior research, we develop two proxies for investors’ expectations of tax avoidance and explore whether deviations from those expectations result in higher ex ante cost of equity capital. We find that the ex ante cost of equity capital increases with tax avoidance that is either below or above investor expectations and that the increase is larger for tax avoidance that exceeds investors’ expectations. We then examine whether firms that alter their future tax avoidance exhibit a lowering of their ex ante cost of equity capital and find that tax avoidance decreases (increases) from the prior year for firms that were above (below) investors’ expectations in the prior year. These results are consistent with the trade‐off suggested by the Scholes and Wolfson framework and reinforce the notion that balancing tax benefits and non‐tax costs is an important feature of firms’ tax planning.