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Recent rapid economic developments in East Asia are evidenced by the establishment of many new factories and enterprises in the region. New production facilities almost always go through a period of “learning” in their production activities. Therefore, the study of learning curve effects in production cost projections is especially important for enterprises in this region that have experienced tremendous business and operational growth. This paper proposes a new way to model the learning curve effects that has not previously been discussed in cost accounting literature.

Neural networks offer an alternative to numerical scoring schemes for credit granting and extension decisions. A standard back‐ propagation neural network running on a DOS personal computer is used with 125 credit applicants whose loan outcomes are known. Applicant characteristics are described as input neurons receiving values representing the individuals' demographic and credit information. Three categories of payment history, delinquent, charged‐off, and paid‐off, are used as the networks output neurons to depict the loan outcomes. After training on part of the data, correct classifications were made on 76–80% of the holdout sample.

Tests whether professional experience and training can mitigate recency effects in an auditor’s belief revision while evaluating internal control. In the experiment, each of the 57 auditor‐subjects was asked to complete a questionnaire on an internal control case. Four pieces of audit evidence (two positive and two negatives) were presented to the subjects in two different orders (++‐ ‐,‐ ‐++). After reading each piece of evidence, the subjects were asked to revise their degree of belief that the internal control system can prevent material errors. ANOVA tests of significance indicated that when auditors were asked to evaluate a short series of complex, mixed evidence, recency effect existed in the auditors’ judgement; however, the recency effect in the case of experienced auditors did not seem to be smaller than their less‐experienced counterparts. This tends to refute the generally accepted notion that the level of substantive testing is influenced by the number of years of audit experience in belief‐revision.

The following paper discusses the costs involved when a library adds online bibliographic searching to the services it offers to its patrons. Reviewed in the study are total online costs, comparisons of manual and online search results, various pricing policy alternatives, and some probable future changes for online bibliographic searching.

This paper seeks to provide empirical evidence showing how bank users of audited financial statements perceive and interpret various dimensions associated with financial reporting in Hong Kong. Employing a survey instrument, we asked bank loan officers to rank the importance of thirty‐five reporting dimensions for lending decisions and to ascertain their expected level of information on each exploratory dimension, as well as their perceptions of the level of information actually provided by audited financial statements. Reliance on principal‐component analysis to extract a set of important dimensions shows that nine reporting dimensions are significantly associated with lending decisions. When bank loan officers' levels of expectations on important reporting dimensions were compared with the corresponding levels of perceived reporting performance, the statistical results reflect the existence of an expectations‐performance gap. Finally, when bank loan officers' perceived levels of reporting performance were hierarchically positioned, audited financial statements were found to provide the most information on a firm's liquidity and profitability, moderate information on reliability‐related dimensions, and the least information on relevance‐related dimensions pertaining to the future prospects of a firm. This empirical evidence signifies the need for future corrective actions in closing the expectations‐performance gap.

Discusses the agency issues underlying corporate governance, refering to research on managerial attitudes/incentives for maximizing shareholder value and pressures to align the interests of directors and shareholders. Reports a survey of finance executives in 175 large firms in 7 EU countries to analyse their strategies and the influence of pressure groups on strategy choice. Shows that market leadership and increased operating margins are the most successful operating strategies; changing productive capacity, generating new/better products and buying business with complementary products are the best investment strategies; and a leveraged buyout is the most effective capital strategy to maximize shareholder returns. Adds that UK managers (like US managers) have a shorter term focus than other European managers, perhaps because their relationships with institutional investors are less close.

Boards of directors often attempt to foster corporate entrepreneurship by replacing a firmʼs chief executive officer (CEO). Compelling theoretical arguments and anecdotal evidence suggest that when firm performance has suffered, a new CEO is best suited to lead the firmʼs creative endeavors. On the other hand, among firms that retain their existing CEO after a decline in performance, manipulating the CEOʼs compensation package is a common governance practice used by boards to encourage innovation. In these cases, some have argued that increasing the CEOʼs pay will encourage corporate entrepreneurship, because the CEO has been compensated for assuming additional risk. Counter to these propositions, this study develops theoretical arguments that a firmʼs existing CEO is better equipped to foster corporate entrepreneurship and that this probability increases when the CEOʼs cash compensation is decreased. Results from a sample of 100 single-product manufacturing firms suggest firms that retain their current CEO and decrease the CEOʼs cash compensation are most likely to engage in corporate entrepreneurship. Implications that this research has for corporate entrepreneurship, corporate governance, and firm performance are discussed.

Suggests that the corporate governance (CG) systems of transition economies in Eastern Europe may differ from those of industrialized countries and describes the governance system in Poland, which uses National Investment Funds (NIFs) under supervisory boards and the Treasury to deal with the restructuring of enterprises to be privatized. Outlines the financial market environment in Poland and the NIFs’ role within it; and discusses the CG issues arising from the relationships between the NIFs and the supervisory boards. Recognizes the problems involved but doubts whether the use of UK/US or german CG systems would solve them. Hopes that the paper will provide a basis for further research.

Since the late 1970s, research in accounting has been colonized by positive accounting theory (PAT) despite strong claims that it is fundamentally flawed in terms of epistemology and methodology. This paper aims to offer new insights to PAT by critically examining its basic tenets.

The paper subjects the language of the Rochester School to a deconstruction that is a transformational reading. This uncovers rhetorical operations and unveils hidden associations with other texts and ideas.

A new interpretation of the Rochester School discourse is provided. To afford scientific credibility to deregulation within the accounting field, Watts and Zimmerman used supplements and missing links to enhance the authority of PAT. They placed supplements inside their texts to provide a misleading image of PAT. These supplements rest on von Hayek's long‐term shaping blueprint to defeat apostles of the welfare state. Yet, to set PAT apart from normative theories that Watts and Zimmerman claimed were contaminated by value judgments, they made no reference in their text to the tight links between the Rochester School and the libertarian project initiated by von Hayek.

Any reading of PAT cannot present the infinite play of meaning that is possible within a text. Deconstruction involves a commitment to on‐going, eternal questioning.

The paper provides evidence of the relation between PAT and the neoliberal (libertarian) project of von Hayek. PAT is viewed as part of the institutional infrastructure and ideological apparatus that legitimates the hegemony of markets.

Organizations are confronted with problems and political risks to which they have to respond, presenting a need to develop tools and frames of understanding requisite to do so. In this article, we argue for the necessity of cultivating “political judgment” with a “sense of reality,” especially in the upper echelons of organizations. This article has two objectives: First to highlight how a number of recent interlinked developments within organizational analysis and practice have contributed to weakening judgment and its accompanying “sense of reality.” Second, to (re)introduce some canonical works that, although less in vogue recently, provide both a source of wisdom and frames of understanding that are key to tackling today’s problems. We begin by mapping the context in which the need for the cultivation of political judgment within organizations has arisen: (i) increasing proliferation of political risks and “wicked problems” to which it is expected that organizations adapt and respond; (ii) a wider historical and contemporary context in which the exercise of judgment has been undermined – a result of a combination of economics-inspired styles of theorizing and an associated obsession with metrics. We also explore the nature of “political judgment” and its accompanying “sense of reality” through the work of authors such as Philip Selznick, Max Weber, Chester Barnard, and Isaiah Berlin. We suggest that these authors have a weighty “sense of reality”; are antithetical to “high,” “abstract,” or “axiomatic” theorizing; and have a profound sense of the burden from exercising political judgment in difficult organizational circumstances.