Advances in Management Accounting: Volume 22

Table of contents

(18 chapters)
Access restricted
Access restricted
Access restricted
Access restricted

List of Contributors

Pages vii-viii
Access restricted
Access restricted
Access restricted
Access restricted

Introduction

Pages xv-xix
Access restricted
Purpose

Extending the work of Bayou (2001), we empirically investigate the relationship between firm size and resource productivity to assess whether the productivity of resources (value in use) and their underlying value at sale (value in sale) vary with firm’s size.

Methodology

We use seemingly unrelated regression of revenues and equity values on assets and employees for a large sample over a wide time period and across all industries. We compare companies that are growing, declining, or continuing in size relative to their industry.

Findings

With some variability on growth, we find that smaller companies hold more productive resources based on their capacity to generate more revenues per unit of resources (assets) relative to large companies. Further, as predicted, a firm’s workforce has productive value in use, but limited value after a firm’s sale as measured by equity values.

Practical implications

Collectively, our findings suggest that firm size matters in influencing resource productivity, and a workforce has productive value in use, but low value in sale.

Access restricted
Purpose

This chapter studies the transfer of performance measurement system (PMS) innovations across the three sectors of the economy: private, public, and nonprofit.

Methodology/approach

The spread of organizational innovations and learning from best practices is slow and complicated (Lillrank, 1995). Based on differences in languages used by writers and readers and differences in employee characteristics among the three sectors as well as cognitive biases, we expect the transfer of PMS innovations to be easier within sectors than across sectors. We use the frequency and timing of journal articles written about activity-based costing and the balanced scorecard as a proxy for the actual transfer of the innovations within and across economic sectors.

Findings

Our empirical results indicate that the transfer of the ideas across economic sectors does not happen as quickly as the transfer of the ideas within sectors. We provide evidence that it is the practitioners, not the academics, who lead the transfer of ideas in the open literature from one sector to another. Viewing a sector as unique limits the applicability of available solutions and applications, thereby inhibits useful change.

Originality/value of paper

By focusing on differences, the exchange of ideas and techniques among the three economic sectors can be hindered.

Access restricted
Purpose

There has been a call for additional managerial accounting research that examines the effect of non-pecuniary preferences (such as those for honesty and fairness) on managerial reporting decisions.

Methodology/approach

Drawing from trait theory, agency theory, and psychological contracts theory, Kidder (2005) suggests that personality traits and perceived unfairness in the workplace both help predict detrimental workplace behaviors, with perceived fairness affecting the honesty in reporting of some individuals but not others. We test Kidder’s (2005) theory in an experimental setting where participants have opportunity and incentive to report dishonestly.

Findings

Participants’ honesty preferences and ethical values (idealism and relativism) were measured, and the fairness of the participants’ employment contracts was manipulated. As predicted, higher preferences for honesty are significantly associated with honesty in reporting, suggesting that participants make trade-offs between increasing their own wealth and acting honestly. Additionally, the perceived fairness of compensation interacted with honesty preferences and relativism to affect honesty in reporting.

Practical and social implications

The implication for practice is that while a small number of employees are likely to consistently behave in honest or self-interested ways, firms may be able to positively influence the behavior of the majority of employees by enacting policies and procedures that contribute to perceptions that compensation is fair.

Originality/value of paper

These findings contribute to our understanding of non-pecuniary preferences on managerial reporting decisions.

Access restricted
Purpose

Companies that adopt lean operations and lean accounting ultimately should achieve better profitability and cash flows than similarly situated companies that do not adopt lean operations and lean accounting.

Methodology

Archival data is analyzed through Wilcoxon signed-ranks, matched-pairs tests.

Findings

Lean companies had greater returns on net operating assets (RNOA), returns on total assets (ROA), operating cash flows, and cash-adequacy ratios than Non-Lean companies. These results were driven by the larger Lean companies. The profit margins and financing-assets ratios also were marginally better for the Lean companies than the Non-Lean companies.

Implications

Lean companies have achieved benefits proposed by the proponents of lean operations. The present study provides a starting point for further research on the financial performance of Lean companies using archival data.

Originality/value

There is limited research on the financial performance of Lean companies that is based on archival data. The present study fills a void in the academic literature. This study measures RNOA, which does not confound operating and financing activities. Additionally, this study utilized a methodology that provides reasonable assurance of the identification of both Lean companies and Non-Lean companies from publicly available data.

Access restricted
Purpose

This study looks at board governance in Ontario hospitals.

Methodology/approach

We conducted a research of the hospitals’ websites and a survey of board directors to study the board structure and examine governance practice in Ontario hospitals.

Findings

The findings suggest that the board structure and process in Ontario hospitals are in compliance with Accreditation Canada’s Governance Standards, and such administrative controls are appropriate. Ontario hospital boards, in general, have fulfilled their key functions of governance in terms of working as an effective board; developing a clear direction; supporting the organization to achieve its mandate; maintaining positive relationships with external stakeholders; and being accountable and achieving sustainable results. Building knowledge through information is an area where improvement is needed.

Research implications

Ontario hospitals have implemented appropriate administrative controls in terms of board composition and committee structure. The results of a survey of 99 board directors from over 25 hospitals suggest that directors, in general, have a good understanding of their governance role and relationship with senior management as well as the government. The findings are also supportive of good governance practice where executives manage and nonexecutive directors monitor the performance of the executives. According to the respondents, Ontario’s hospital boards are actively involved in setting the mission, strategic goals and objectives of their organizations, and they take appropriate steps to ensure that risk management, client safety, and quality improvements are incorporated in their governance and strategic planning process. In order to discharge their fiduciary duty effectively, respondents would like to have more information from different sources. This is an area where management accounting professionals can become involved such that relevant information from a variety of sources, especially external sources, are provided to board directors for decision making.

Practical implications

Ontario’s hospital sector has undertaken initiatives through research and publications to promote good governance practice. Such leadership is critical to ensure that directors have the competence and skills to discharge their duties and responsibilities diligently. Hospital boards should focus on renewal while ensuring that board directors are equipped for the challenging task of governing through professional development and continuing education.

Limitations and future research

Limitations related to the use of questionnaire applies to this research study. Self-selection bias and low response rate limit the generalizability of the findings. Future research can examine the behavior of directors in the boardroom and the impact of governance variables on hospital performance, such as quality of care and patient safety.

Access restricted
Purpose

This paper examines how target costing decisions can be impacted by product and production interdependencies.

Design/methodology/approach

Numerical examples are used to investigate the effect that product and production interdependencies have on target costing decisions. Mixed integer programming and simulation are used to model the interrelationships between a product’s cost reduction effort and related decisions such as product mix, pricing, and capacity acquisition. Product and production interdependencies are introduced by evaluating a product with multiple price and demand options, capacity is acquired in large discrete quantities, and resources have economies of scale. Analyses of choices made with and without considering product and production interdependencies are used to evaluate their effects on target costing decisions.

Findings

A product’s cost reduction effort cannot be determined independently of other production-related choices, such as product mix, capacity, and price, in the presence of product and production interdependencies.

Research implications

The findings of this paper underscore the need for additional research to understand the conditions that impair target costing decisions and the economic consequences of suboptimal decisions.

Practical implications

Rather than assessing target costing decisions at the individual product level, these decisions must be evaluated at the portfolio level of the firm’s operations.

Social implications

Suboptimal target costing decisions impact the products and product mix that the firm chooses to offer, which affects the ability of organizations to effectively achieve their strategic goals.

Originality/value

This paper identifies new limitations to target costing that can help managers understand the technique better and lead to improved target costing decisions.

Access restricted
Purpose

This chapter takes a critical perspective on the conventional wisdom that more advanced cost allocation methods have the potential to provide a more accurate picture of “true” cost, inevitably leading to optimal product mix and pricing decisions, and ultimately to greater profitability.

Methodology

Two concrete examples of the growing divergence between cost accounting theory and practice – the failures of activity-based costing and the reciprocal method of service department cost allocation to take root in practice – are examined through the lens of post-structuralist literary theory.

Findings

The findings suggest that economic truth has been devoured in an accounting simulation. The accounting model no longer reflects any profound economic reality; it precedes reality.

Research/practical implications

Much of the mainstream management accounting literature remains theoretically grounded in the belief that ‘true’ cost exists, as an object, which is revealed through our cost accounting systems. This chapter raises serious questions about this foundation, and therefore the practical applicability of a great deal of research.

Social implications

Society has granted the accounting profession a great deal of responsibility and autonomy, largely on the confidence that it has historically provided an objective and truthful model of economic reality. The findings in this chapter suggest that the basis for the accounting profession’s preferential charter in society ought to be critically examined.

Originality/value of paper

At a time where research has advanced toward an ever-narrower focus on self-referential tautologies and ever more complex modeling techniques, this chapter provides a new and stimulating, albeit provocative, perspective to yet unresolved issues in management accounting research and practice.

Access restricted
Purpose

We examine how input- (vs. output-) based performance evaluation and incentive intensity impact employees’ autonomous motivation, thereby influence their proactive work behaviors.

Methodology

We collected survey responses from 309 employees of different firms. Multi-group Structural Equation Modeling analyses were used to analyze the data.

Findings

Input-based evaluation had a positive effect on autonomous motivation and proactive work behaviors when task uncertainty was high, but a negative effect when it was low. Autonomous motivation had a positive effect on proactive work behaviors.

Research implications

Our results on the moderating effect of task uncertainty provide insights into inconsistencies in earlier studies. Moreover, applying self-determination theory of motivation to incentive research can provide some insights into why sometimes, incentives can negatively affect performance.

Practical implications

The study of proactive work behaviors is important because despite their necessity in the fast-changing business environment, they are relatively unexplored in the incentive literature. Proactivity is especially important for tasks that are high in uncertainty because the exact tasks to achieve those goals are hard to specify.

Originality/value of paper

We investigate the effect of performance management system on proactive work behaviors, mediated by autonomous motivation and moderated by task uncertainty.

Access restricted
Purpose

The purpose of this study is to investigate how a combination of Normative Commitment (NC) and Instrumental Commitment (IC) affects the creation of budgetary slack when the decision-making mode is individual versus group.

Methodology

We use 86 students in a two-by-two experimental design (individuals vs. groups and a combination of NC/IC vs. no NC/IC), fully crossed between participants, to examine the combined effects of NC/IC on budgetary slack creation by individuals and group members.

Findings

The results show that groups without NC/IC create the highest budgetary slack and differ from the other three experimental cells (groups with NC/IC and individuals with and without NC/IC). In addition, individuals with NC/IC also differ from individuals without NC/IC.

Research limitation

Research limitations are formation of groups, validity threats common to laboratory experiments, and generalizability of the findings. We do not believe these limitations are affecting the results.

Practical implications

As organizations continue to increase the use of group decision-making for setting their budgets, they may want to monitor groups with low NC/IC due to higher slack creation.

Social implications

Use of groups can impact prosocial behavior via creating a “label” and/or forming social ties in budgeting.

Originality/value of the paper

This study extends budgetary slack creation under individuals versus group decision-making, introduces the combined effects of NC/IC as a psychological contract to the accounting literature, and examines the combined NC/IC effect on groups as compared to individuals.

Access restricted
DOI
10.1108/S1474-7871(2013)22
Publication date
2014-08-23
Book series
Advances in Management Accounting
Series copyright holder
Emerald Publishing Limited
ISBN
978-1-78190-842-6
Book series ISSN
1474-7871