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The impact of accounting earnings based compensation contracts an effort allocation is analyzed using an agency‐theoretic model. In this model, the CEO of a publicly traded firm expends effort on operational short‐run activities and strategic long‐run activities. The shareholders desire the CEO to expend more effort in the strategic long‐run activities because the return to shareholders depends more on long‐run than short‐run activities. More specifically, they desire the effort to be allocated between these two activities on the proportion of the sensitivity of stock returns to these two activities. Compensating the CEO based on the stock returns performance measure is shown to induce the CEO to exert the desired proportion of effort in the long‐run activities. Unlike stock returns, accounting earnings are believed to focus more on the short‐run performance of the firm and not reflect the full impact of a CEO's long‐run effort. Compensating the CEO based on accounting earnings, in addition to stock returns, is shown to induce the CEO to expend less than the desired proportion of effort in long‐run activities. As the emphasis placed on accounting earnings relative to stock returns increases, the CEO decreases the proportion of effort expended in long‐run activities. On the positive side, including accounting earnings in the contract increases the total effort that the CEO exerts in short‐run and long‐run activities. The benefit accruing from the increase in total effort more than offsets the dysfunctionality caused by the short‐run focus. More specifically, adding accounting earnings to the incentive contract is shown to increase the expected return to the shareholders. In summary, while accounting earnings cause the CEO to be short‐run focused, their use in the incentive contract improves the firm's performance by motivating the CEO to work harder overall.

Accounting researchers have performed many studies related to public sector budgeting and financial management. Public sector accounting research seeks to explain the role of accounting and auditing in the public sector. For example, researchers examine issues such as (1) the use of accounting information by elected officials, (2) the demand for auditing, and (3) the determination of bond ratings. This review of the public sector accounting literature describes some of the theoretical foundations utilized in public sector accounting research and reviews a sample of selected empirical studies.

The purpose of this paper is to investigate the relationship between the strategic positioning of firms and the sustainability of firm performance. The paper argues that pursuing a differentiation strategy leads to more sustainable financial performance compared to following a cost leadership strategy. However, a differentiation strategy may also be associated with greater risk.

To investigate the research questions, the authors utilize publicly available archival data consisting of 12,849 firm-year observations for the period 1989-2003. In the first stage of the analysis, factor analysis is used to determine firms’ strategic positioning. The resulting factor scores are subsequently used in regression analysis to investigate the sustainability of performance based on the strategic positioning of firms.

The results indicate that both cost leadership and differentiation strategies have a positive impact on contemporaneous performance. However, the differentiation strategy allows a firm to sustain its current performance in the future to a greater extent than a cost leadership strategy. The differentiation strategy, though, is also associated with greater systematic risk and more unstable performance.

Sustainability of performance refers to how much a firm's current profitability can be sustained in future periods. The main contribution of this study is the comparison of generic strategies based on the sustainability of firm performance. This aspect of the strategy-performance link has not been considered in prior work. Another contribution of the study is that it considers multiple dimensions of firm performance in order to evaluate the trade-offs involved with pursuing different strategies. In particular, the authors contribute to the literature by documenting that while differentiation leads to more sustainable earnings, it also leads to riskier and more unstable earnings.

The relationship between the size of state audit budgets, audit responsibilities, professional characteristics of staff, risk, and tax and expenditure limitations is explored. Bivariate relationships are examined and then a model is estimated which controls for size, complexity, financial risk factors, and political risk factors. This provides a framework for considering the incremental influence of specialized audit inputs. Both "brand names" and size have been used in past research to proxy for quality dimensions intended to differentiate the audit product provided by different suppliers. This research extends such work by considering characteristics of the auditing services as reflected by specific inputs and by using cost data rather than audit fee data. The states are observed to differ in their responses to financial and political factors by spending resources on peer review, continuing professional education, certifications of professional staff, and expertise in both the computer science area and in law. A positive association of cost and auditor differentiation, implicit in past audit fee literature is corroborated.

This paper represents a discussion of transfer pricing (TP). Key factors are identified and propositions developed from tax accounting and other perspectives. Stages of the TP decision process are identified along with the critical factors directly affecting sales and a TP audit. Propositions are derived which show relationships among these variables and tax rates, competition, and TP methodologies. Finally, academic research implications are suggested.

This year, Benchmarking: An International Journal (BIJ) is celebrating its 25th anniversary. The purpose of this paper is to show the historical connections and professional impact of the journal over the years. This is accomplished through a detailed bibliometric analysis (BA) of its content from 1994 to 2018. This paper also identifies leading trends that have affected BIJ during this time frame.

In this paper, the authors employ BA on data retrieved from the Scopus database. The authors used various indicators such as the most productive authors, institutions and countries, as well as the most cited papers, citing journals and articles most cited by BIJ between 1994 and 2018. Additionally, the authors have used the Gephi, VOSviewer software to map journals, keywords and institutions with bibliographic coupling and co-citation analysis.

The journal has improved its impact, productivity and reputation in the period under review. Articles published in BIJ have been cited in other journals more than 15,000 times. The most prominent themes among the articles published in BIJ are benchmarking, supply chain management and performance improvement. Significant contributions have come from authors and institutions around the globe. Co-authorships, though global, have centered around India, the USA and the UK. There is also a thematic similarity between articles from India and Thailand, and the USA and Germany, indicating high academic collaboration or prevalence of similar issues.

This paper provides evidence of the impact of BIJ, and in so doing, it helps authors to decide on the appropriateness of this publication for their research. The reader will also understand leading trends occurring in BIJ over the history of the journal.

This is the first paper that traces the progress of BIJ covering a time span of 25 years.

The purpose of this paper is to improve the estimation of the production frontier in cases where outliers exist. We focus on the case when outliers appear above the true frontier due to measurement error.

The authors use stochastic data envelopment analysis (SDEA) to allow observed points above the frontier. They supplement SDEA with assumptions on the efficiency and show that the true frontier in the presence of outliers can be derived.

This paper finds that the authors’ maximum likelihood approach outperforms super-efficiency measures. Using simulations, this paper shows that SDEA is a useful model for outlier detection.

The model developed in this paper is original; the authors add distributional assumptions to derive the optimal quantile with SDEA to remove outliers. The authors believe that the value of the paper will lead to many citations because real-world data are often subject to outliers.