Stakeholder theory research identifies changes in language as one possible mechanism to overcome the deficiencies of current accounting practices with regard to social aspects. This study aims to examine the effects of the terms used for specific accounts on company internal decision-making, drawing on the example of “value creation accounting”.
The study uses a survey based-experiment to analyze the effects of terms used for specific accounts on decision-making, with a focus on social aspects (in particular expenditures for staff) in cost reduction and expenditure decisions.
The findings indicate that wordings, which more closely relate to value creation than to costs, decrease cost reductions and increase the priority ascribed to the social aspect of reducing staff costs in times of financial shortage. The effects of terms used on cost reductions are stronger among female decision makers.
The analysis suggests that conventional accounting language best suits organizations that aim at incentivizing decision makers to primarily cut costs. By contrast, if an organization follows an approach that puts importance on social aspects in times of financial shortage and on not doing too sharp cost reductions, value creation-oriented language is the more effective approach.
The study suggests that the specific terminology used for accounts should be chosen more carefully and with awareness for the possible effects on cost reduction decisions as well as on social consequences.
This study contributes to a better understanding of the relevance of language in accounting. It suggests that the terms used for accounts should be chosen purposefully because of their far-reaching potential consequences for stakeholders as well as for the organization.
Hummel, P. and Hörisch, J. (2020), "The hidden power of language: How “value creation accounting” influences decisions on expenditures, cost reductions and staff costs", Sustainability Accounting, Management and Policy Journal, Vol. 11 No. 1, pp. 187-206. https://doi.org/10.1108/SAMPJ-04-2018-0111
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