The (Dis)Advantage of Friendship on Information Search and Satisfaction

Across four experiments, and focusing on consumer behaviour in a high uncertainty market (i.e., a used car market), this research shows that prior to a purchase, buyers are less motivated to search for information when they purchase a product from a friend (compared to someone they do not know). We also show that buyers are more willing to search for information after a transaction when sellers are their friends, a reversal in search behaviour due to the greater social risk that buyers bear when dealing with a friend. Finally, this research shows that both the transaction outcome (i.e., positive versus negative) and the buyer–seller relationship determine the degree to which people are satisfied or dissatisfied with a seller. Copyright © 2018 ASAC. Published by John Wiley & Sons, Ltd.     

Overconfidence and Resistance to Abandoning Unprofitable Capital Budgeting Projects: The Effects of Autonomy,Internal Audit,and Accountability

The purpose of this study is to investigate the effects of managers' autonomy in choosing a capital budgeting project has on their confidence in managing the project. Furthermore, this study examines the role that internal audit reports and accountability play in mitigating the impact of autonomy on managers' resistance to abandoning unprofitable capital budgeting projects. Building on motivated reasoning theory, we hypothesize and find that managers who are given autonomy to choose their own projects are more confident that their projects will be successful than managers who are assigned the projects by their superiors. This study also shows that internal audit reports and accountability are effective mechanisms for reducing the influence of prior decisions on managers' resistance to abandoning unprofitable projects.     

Applying complexity theory to explain partner cooperation: The role of transaction cost‐related factors and elements of relational exchanges

Using complexity theory, we seek to better understand the configurations of causal factors stimulating joint ventures' cooperation in Chinese manufacturing context. To this end, we adopt two dominant perspectives of transaction cost economics and relational exchange theory to identify transaction cost‐related factors and elements of relational exchanges as critical factors in joint ventures' cooperation. We apply fuzzy‐set qualitative comparative analysis on a sample of 268 joint venture partners to test research propositions. The findings indicate a need for competence trust and goodwill trust and also show that extorting rent cost should be emphasized. Results reveal those six configurations of causal factors that explain high intention to cooperate. Copyright © 2017 ASAC. Published by John Wiley & Sons, Ltd.     

The dynamics of privilege: How employees of a multinational corporation construct and contest the privileging effects of English proficiency

In this article we analyze how privilege is dynamically constructed as well as contested. A positioning analysis of interviews with employees of a multinational organization reveals the construction of a hierarchy of privilege. As this hierarchy is based on English proficiency along with other diversity dimensions, privilege is multifaceted. Furthermore, privilege is also contested. Contesting English-proficiency–related privilege is connected to the speaker's position in the hierarchy of privilege. The analysis shows that both category membership and specific competences and skills cumulate to produce privileging effects, but also the possibilities for contesting privilege. At the same time, although the privilege gained by English proficiency is not invisible and is regularly contested, it is nevertheless silenced by those in advantage.     

The Effects of Creative Culture on Real Earnings Management*

Creativity and innovation have been identified by senior executives as some of the most desired characteristics of corporate culture. Accordingly, managers strive to build these cultures within their organizations. However, research in psychology suggests that these attempts may have unintended negative consequences. In this study, I predict and find that managers in a more (versus less) innovative company culture will engage in higher levels of real earnings management (REM). I then test two construal level theory (CLT)-based interventions designed to reduce REM. As I predict, I find that in more innovative corporate cultures an intervention that makes downside risk more salient reduces REM, but an intervention that encourages managers to consider the “big-picture” impact of their decision reduces REM to a greater extent. Unexpectedly, I also find that the effect of the “big-picture” intervention reverses in a less innovative corporate culture leading to an increase in REM. My findings contribute to the emerging accounting literature regarding REM. I also extend the psychology literature investigating the link between opportunistic behavior and creativity, and I also expand research into how interventions based on CLT can affect judgment and decision making in an accounting context.     

Endogeneity and the Dynamics of Voluntary Disclosure Quality: Is there Really an Effect on the Cost of Equity Capital?*

Research on the effects of voluntary disclosure quality on the cost of equity capital is often plagued by endogeneity concerns. In this paper, I use a dynamic panel system GMM estimator, which provides internal instruments from the firm's history that directly address endogeneity arising from unobserved heterogeneity and simultaneity. By using hand-collected voluntary disclosure scores for firms listed in the Swiss stock exchange, I examine the dynamic relation between voluntary disclosure quality and the cost of equity capital in a panel over a period of 10 years. The results suggest that the relation between voluntary disclosure quality and the cost of equity capital becomes insignificant after controlling adequately for potential dynamic endogeneity, simultaneity, and unobserved heterogeneity.     

Connections between the Market Pricing of Accruals Quality and Accounting-Based Anomalies*

We examine whether prior findings on the market pricing of accruals quality (AQ) can be attributed to other forms of accounting-based anomalies. Using hedge portfolio analysis and cross-sectional regressions, we find that the return predictive power of AQ overlaps with several other accounting signals. We also find that, similar to other accounting-based anomalies, especially the accruals anomaly, the AQ pricing effect (i) is likely due to mispricing instead of risk pricing, (ii) is attenuated in recent years, and (iii) disappears among firms with cash flow forecasts or long-term growth forecasts. Our findings highlight the importance of controlling for existing return predictive signals when evaluating the market pricing of AQ.     

An Empirical Analysis of Analysts' Capital Expenditure Forecasts: Evidence from Corporate Investment Efficiency*

We examine whether the information conveyed in a relatively new analyst research output—capital expenditure (capex) forecasts—affects corporate investment efficiency. We find that firms with analyst capex forecasts exhibit higher investment efficiency. This effect is stronger when the forecasts are issued by analysts with higher ability or greater industry knowledge. Moreover, the effect of capex forecasts on investment efficiency varies with the signals they convey about future growth opportunities—positive-growth signals are more effective in reducing underinvestment, while negative-growth signals are more effective in reducing overinvestment. Cross-sectional tests suggest that these effects operate at least in part through both a financing channel and a monitoring channel. Taken together, our results suggest that analysts' capex forecasts convey useful information about firms' growth opportunities to managers and investors, which can facilitate efficient investment.     

Investor Sentiment,Misstatements, and Auditor Behavior*

High investor sentiment has been linked with opportunistic managerial behavior in the face of more optimistic investors and analysts. We extend this line of work by documenting that the likelihood of misstatements is higher when sentiment is high. Although this would suggest elevated audit risk, we posit that a contemporaneous reduction in auditors' litigation cost could drive down audit fees and going concern opinion (GCO) reporting conservatism in order to please clientele. Consistent with this notion, we document that auditors charge lower fees and report GCOs less conservatively when sentiment is high. However, this reduction in reporting conservatism is unwarranted; results reveal that auditors are less likely to issue GCOs to clients which subsequently file for bankruptcy during high sentiment periods. We conduct additional tests to examine whether auditors' litigation costs indeed vary with sentiment and document that auditors are less likely to be sued and the market reacts less negatively to misstatement announcements when sentiment is high. Collectively, our findings suggest that, although misstatement risk is increasing with sentiment, auditors' litigation risk actually declines.     

Getting From ‘Me’ to ‘We’: Role Clarity,Team Process,and the Transition From Individual Knowledge to Shared Mental Models in Employee Dyads

Shared mental models are crucial for team functioning; however, little research to date has focussed on uncovering the predictors of shared mental models. The present study investigates the effect of role clarity on shared mental models by means of its indirect effects via team process. Two hundred and two undergraduate students participated in a dyadic firefighting simulation in which their role clarity, team process, and mental model similarity were measured. Analyses conducted at the dyadic level suggest that role clarity predicts mental model similarity via its effects on team process. Copyright © 2018 ASAC. Published by John Wiley & Sons, Ltd.