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Earnings management is a common term in the academic community and is likely understood by managers and professional investors, but how the large community of non-professional investors interprets this term is less clear. We examine non-professional investors’ attitudes toward earnings management and their resulting investing behaviors using a 2 × 2 mixed design. We manipulate investor role (prospective vs current) between participants and the method of earnings management within participants. We believe that different investment goals (prevention vs promotion) between current and prospective investors should lead to different investing behaviors. Consistent with our expectations, we find that current investors are more likely to maintain an equity than prospective investors are to invest in the same opportunity. Further, the consistent link between investors’ attitudes and actual investment behavior is only present for prospective investors. The prevention goal drives the current investors to maintain their investment, while the prospective investors remain more objective and focus on a goal of promotion. Importantly, prior research examining investor attitude toward earnings management has failed to link investors’ attitudes with actual investing decisions; our study attempts to fill this void by examining attitudes toward earnings management as well as subsequent investment behavior.

We conduct an experiment to analyze the impact of a well-established psychological construct, need for cognition, in an audit-related decision context. By simulating a basic audit sampling task, we determine whether the desire to engage in a cognitive process influences decisions made during that task. Specifically, we investigate whether an individual's need for cognition influences the quantity of data collected, the revision of a predetermined sampling plan, and the time taken to make a decision. Additionally, we examine the impact of cost constraints during the decision-making process.

Contrary to results in previous studies, we find those with a higher need for cognition sought less data than those with a lower need for cognition to make an audit sampling decision. In addition, we find that the need for cognition had no relationship to sampling plan revisions or the time needed to make an audit sampling decision. Previous studies regarding the need for cognition did not utilize incremental costs for additional decision-making information. Potentially, these costs provided cognitive challenges that influenced decision outcomes.

Section 404 of the Sarbanes‐Oxley Act of 2002 (SOX 404) requires auditors to attest to, and report on, management's assessment and effectiveness of the company's internal control systems. This paper aims to examine investor reaction to companies' announcements of new information technology (IT) or improved existing IT to satisfy requirements of Section 404 of the Sarbanes‐Oxley Act of 2002.

Using a sample of 124 SOX‐related IT announcements from 2003 to 2007, an event study measuring market reactions using average cumulative abnormal return is undertaken. Additionally, the cross‐sectional variation in the marketplace is analyzed to test the effect of firm‐specific factors on market responses.

The empirical results suggest that the stock market reacts favorably to corporations that invest in SOX 404‐related IT. The reaction is more favorable toward companies without prior reported internal control deficiencies/weaknesses. Additionally, the results marginally support the notion that firms with higher risk and poorer financial reporting quality can demonstrate their commitment to improve internal control over financial reporting by investing in IT for SOX 404 compliance.

The findings will influence companies' IT investment decisions, particularly IT decisions that are SOX Section 404‐related. Potential benefits of SOX 404 IT investments include favorable market returns. Additionally, the study contributes to a deeper understanding of SOX for standard‐setting and regulation bodies examining past rulings and preparing for future regulation.

The purpose of this paper is to explore the role of manager responsiveness and social presence in the decision to engage in fraudulent expense reporting. While research has focussed on the direct effect of information technology (IT) on user behaviors, there is a lack of research investigating possible mediating factors of this relationship. As such, the paper examines the impact of affect and its effect on users’ behavior when using ITs.

The authors conduct an experiment to investigate possible behavior differences due to affect formulated in the early phase of pre-travel approval and the use of IT in the expense reporting phase. Consistent with social presence theory, the experiment participants engage in the pre-travel approval and expense reporting phases using either face-to-face communication (high-social presence) or web-based communication (low-social presence). The authors manipulate conditions in which affect is formulated by varying the manager's responses to the pre-travel approval request between positive and negative. All participants in the experiment then file an expense report.

The authors find that negative managerial support for employees’ pre-travel requests and the resulting negative employee affect have a significant impact on expense reporting behavior. Social presence during the pre-travel approval and expense reporting phases itself is not a sufficient factor to explain variations in final expense reporting behavior. However, when considering manager responsiveness, employee affect, and social presence together, the authors find that social presence is not an isolated factor. If an employee forms negative feelings, a low-social presence as observed in web-based communication leads to more undesired expense reporting behavior.

Results of this study contribute both to research and practice. This research is the first to investigate expense reporting fraud in a controlled experiment to isolate possible causes of the behavior using an experiment methodology. In addition, the paper investigates two very important factors identified in the prior literature as critical factors explaining the effect of using ITs on actual behaviors: manager responsiveness and social presence.

As companies seek help from ITs to process and manage expense reports in order to curb ever-rising operating costs, an important but unapparent assumption is consistently overlooked: do people act the same way when facing the less-human IT as when facing a real person? This study contributes to the literature by investigating this issue from two perspectives, the psychological factor due to manager responsiveness and the effect of social presence by using less-human IT to complete the expense report process.

Recent economic situations have put pressure on organizations to cut costs by implementing new technologies to streamline expense reporting processes. At the same time, deterring fraudulent behavior is also a top priority in many organizations. This study provides evidence that psychological factors cannot be overlooked when information systems are used to improve business processes and prevent fraud.

The purpose of this paper is to investigate how the strategic management concept of “strategy tools” (STs) can be reinterpreted from an industrial network perspective. It considers how STs are used to influence the substance of relationships and how firms engage in strategic action by using such tools.

Using case study research involving three focal firms, the paper scrutinizes use of selected STs to examine how they are used to systematically relate to others and create benefits and affect development paths in business relationships.

STs can be viewed as an integrated part of a networking pattern of mobilizing resources, linking activities and relating actors. Seen in this manner, use of STs can be interaction-facilitating or interaction-creating.

In an interactive approach, STs must be seen in relation to others as they are used in strategic (co-)action to engage and involve others. In this view, tools are strategic when used to affect the long-term development of important business relationships.

Practitioners should acknowledge that the use of a ST to handle counterparts is emerging, and valuable only in relation to specific others. Because the value of STs is unknowable until it is revealed how they can affect the substance of a specific relationship, there is no best-practice or one-size-fits-all approach.

This paper illuminates the phenomenon of “strategy tools” by considering it from both sides of the business exchange interface.

Relationship marketing (RM) was conceived as an approach to industrial and service markets, and was considered inappropriate in other marketing contexts. Recently, however, the domain of RM has been extended to incorporate innovative applications in mass consumer markets. Much has changed in a few short years. Recent applications of RM in consumer markets have been facilitated by developments in direct and database marketing within an increasingly competitive and fragmented marketplace. This paper presents a critical review of the history of RM in consumer markets, and incorporates important conceptual, practical, empirical and popular contributions. A number of critical issues which remain unresolved are identified in the paper. These form the basis of ten research propositions which are crucial to justifying and advancing the domain extension into consumer markets.

This paper reviews evidence about the relationships between NHS services and nursing and residential homes in England and Wales. Since the transfer in 1993 of responsibility for funding nursing and residential home care for less affluent older people to local authority social services departments, nursing and residential care has been widely assumed to constitute part of ‘social care’ services. This obscures the fact that residents of nursing and residential care homes frequently have substantial and complex healthcare needs. While some of these healthcare needs may be met through the care provided within homes themselves, most will require substantial contributions from NHS medical, nursing, pharmaceutical and other services. The National Service Framework for Older People (Department of Health, 2001) prioritises reinvestment in intermediate care services, building on the expectation in The NHS Plan (Department of Health, 2000a) that residential and nursing homes will play a major role in the development of these services. This expectation has been further reinforced by the Concordat with the private and voluntary healthcare provider sector (Department of Health, 2000b). However there is little evidence about the NHS services which are currently provided to nursing and residential homes, nor about the capacity of mainstream NHS services to meet the projected development of intermediate care services within the independent institutional sector. This paper reviews the evidence which is available and highlights some of the priorities which primary care groups in England (local health groups in Wales) will need to consider if they are to develop integrated and good quality services for frail older people.