Accounting - Research Publications
Now showing items 1-12 of 72
Air pollution and analyst information production
Recent studies investigate the impact of air pollution on labor productivity. We extend this literature by showing that air pollution negatively affects equity analyst information production. Analysts exposed to air pollution are less likely to issue timely forecasts or improve their forecast accuracy. Investigating the underlying mechanism, we find that analysts exposed to air pollution are less likely to provide bold (especially, negatively bold) forecasts. We also find evidence that market pricing is less sensitive to forecast revisions issued by analysts exposed to air pollution. Our results are robust to controlling for firm/analyst and time fixed effects, as well as additional specifications employing difference-in-differences designs and placebo tests.
Heaping of Executive Compensation
(American Accounting Association, 2020-04-21)
We investigate whether compensation grants are subject to "heaping", the tendency of less informed individuals to provide round values when reporting estimates of discrete data. We document that an unexpectedly large number of CEOs receive round compensation (i.e., evenly divisible by 100,000 and/or 10,000). We investigate whether consistent with heaping, frequency of round compensation varies with proxies for boards of directors' effort in setting compensation. We find that round compensation is more common when boards have characteristics suggesting they provide weak oversight of compensation and thus face more uncertainty in estimating compensation. We also find less frequent round compensation when boards face stronger pressure from external stakeholders, encouraging boards to expend additional cognitive effort in setting compensation. Further, consistent with weak oversight of compensation, round compensation tends to be higher than non-round compensation. However, we do not find a consistent association between this higher, round compensation and future firm performance.
Reporting Bias and Monitoring in Clean Development Mechanism Projects
Abstract The Clean Development Mechanism (CDM) is a flexible carbon market mechanism managed by the United Nations. The program grants tradable carbon emissions credits (Certified Emission Reductions) for carbon‐reducing projects in developing countries. A project can only be admitted to program if it is not financially profitable, and thus would not take place, without the emission credits granted through the CDM. In this paper, we examine how monitoring reduces incentives of companies to bias the reported expected financial viability of potential CDM projects to gain admission to the program. We find that reported rates of return, which are a key factor for admission to the program, tend to be downwardly biased and are negatively associated with the expected benefits stemming from forecasted greenhouse gas reductions. However, monitoring from various sources mitigates some of the distorted incentives and related reporting bias. Furthermore, the monitoring effect becomes much stronger after 2008, when the CDM Executive Board implemented a series of measures to strengthen the additionality testing which provides guidance for program applications.
Firm enablement through outsourcing: a longitudinal analysis of how outsourcing enables process improvement under financial and competence constraints
The dominant view is that outsourcing is driven by efficiency considerations. We demonstrate that a different path to outsourcing originates from critical internal resource shortages. These shortages pose a critical dilemma; on the one hand outsourcing is a reasonably durable approach to solving resource shortages. On the other hand, the same resource shortages complicate the management of outsourcing and may create knowledge and evaluation problems. We empirically examine this dilemma and thereby add to the limited work on the enabling effects of outsourcing under resource constraints. We employ two rich and unique panel datasets of Australian firms observed over five-year periods, to test dynamic change models if firm-level financial and competence constraints induce outsourcing, and if this in turn enables internal process improvement. The results show that outsourcing indeed is associated with both financial and competence constraints, although the impact of these constraints differs over time. In turn, we find that increased outsourcing relates positively to contemporaneous and future process improvement. These findings thus shed a positive light on how outsourcing can enable firms to overcome constraints and realize internal process improvement.
Accounting Conservatism and Bankruptcy Risk
(SAGE Publications, 2020)
For a large sample of U.S. listed firms, we find that unconditional and conditional accounting conservatism help lower bankruptcy risk. We further find that the mitigating effect of accounting conservatism on bankruptcy risk functions via cash enhancement and earnings management mitigation channels. This evidence is relevant to accounting standards setting, financial regulation, financial risk management, and helps explain conservatism’s longstanding presence as a pervasive feature of financial accounting.
Implementing AASB 16 Leases: Are Preparers Ready?
(The University of Melbourne, 2019)
This is the first report of a project examining the introduction of AASB 16 Leases (AASB 16), the Australian equivalent of IFRS 16 Leases. It reports on a survey that provides a snapshot of the process of implementation of AASB 16 Leases by preparers. A subsequent report, to be released in 2020, will report on an interview-based study of users of financial reports prepared under AASB 16. The results indicate that entities have made relatively good progress in implementing the standard, focusing their project structure on existing internal resources. Preparers have faced challenges in implementation, including the need for additional data collection and systems implementation. However, the results suggest that preparers are expecting to see the benefits of adopting the new standard highlighted by the standard-setters, including enhanced comparability and transparency. Importantly, the need for recognition of (almost) all leases on the balance sheet is an improvement to the quality of the underlying lease data, and thus the quality of the reported information to users of financial statements. This report aims to assist preparers in benchmarking their progress against peers, and for policy makers, including Australian and international standard-setters, to receive feedback as input to the post-implementation review process of AASB 16 and its international equivalent, IFRS 16.
Expertise and Discretionary Bonus Decisions
We examine the association between managers’ expertise and their discretionary bonus decisions in a hospital setting. We hypothesize that high-expertise managers make decisions that encourage cooperation among their subordinates. However, low-expertise managers cannot do so because their lower levels of knowledge, experience, and domain expertise prevent them from having sufficient personal influence to persuade other professionals to cooperate. We find that high-expertise managers make two types of bonus decisions: (1) keep a smaller share of the bonus pool than what they are entitled to retain and (2) allocate the remainder to subordinates more evenly after adjusting for the underlying heterogeneity in their productivity. We also find evidence that high-expertise managers whose bonus decisions reflect their support for cooperation have higher department performance than all other managers.
Philanthropy: Toward a Better Practice Model
(Asia Pacific Social Impact Centre, 2018)
Philanthropy is an important catalyst for social change and plays a pivotal and instrumental role in supporting communities and ameliorating disadvantage. The Trust Company’s Engaged Philanthropy Model suggested five key pillars of a good practice grant making framework: 1. Grant making philosophy 2. Capacity building and not-for-profit resilience 3. Scaling, replication and collaboration 4. The strength of the relationship between grant makers and grant seekers 5. Approaches to evaluation and social impact Building on these pillars, this project developed a survey tool to establish a framework for thinking about philanthropic practices and supporting better practice models. These results are substantiated by thirty interviews with grant makers and grant seekers. In general there is optimism about the future of philanthropy in Australia and a genuine desire to continue to develop best practice approaches to social impact by both grant makers and grant seekers. All those interviewed were united in their commitment to address serious social problems and work collaboratively to support social change. However, our findings revealed a disconnect between Australian grant seeker and grant maker perceptions around these issues, with philanthropists having a far more favourable view of the state of practices and relationships in the sector than their not-forprofit (NFP) counterparts. Interview respondents from throughout the sector identified multiple causes for the mismatch between grant maker and grant seeker and experiences and impressions, and broadly felt that the responsibility and power to continue to enhance philanthropic impact lay with the continued development of more strategic relationships between the NFPs and philanthropy. An important catalyst is a greater focus on the strategic impact of philanthropic initiatives and a higher priority by philanthropic decision makers, namely the philanthropists themselves, and the Boards and Trustees responsible for governance of philanthropic entities, to clarify their strategic intent and measure their performance against this strategy. The insights from this report establish a benchmark for the current state of play in Australia. It presents challenges, but also enormous opportunity for changes that will build towards better practice models and increased impact of Australian philanthropy. The NFP sector is seeking stronger, more strategic relationships with grant makers in order to make that happen.
Sustainability Reporting Playbook
(Network for Business Sustainability, 2017-10-11)
Sustainability reporting can allow internal stakeholders to be more effective in their roles. It can increase employee engagement and inform management decision-making, among other benefits. Yet companies often fail to connect sustainability reporting to the core operations of the business, and so fail to realize the potential benefits. This playbook identifies opportunities for enhancing the effectiveness and impact of sustainability reporting.
A Framework for Relationships in Outsourcing: Contract Management Archetypes
Outsourcing engagements are defined by contracts, but personal relationships drive success. In this paper, we propose a set of behavior archetypes and use them within four action-research cases that altered behavior to achieve positive outcomes. The results suggest that a successful outsourcing engagement can be derived through adaptation of well-considered behavioral approaches rather than contracting techniques.
Enablers and Mechanisms: Practices for Achieving Synergy with Business Analytics
Business Analytics (BA) systems use advanced statistical and computational techniques to analyze organizational data and enable informed and insightful decision-making. BA systems interact with other organizational systems and if their relationship is synergistic, together they create higher-order BA-enabled organizational systems, which have the potential to create value and gain competitive advantage. In this paper, we focus on the enablers and mechanisms of synergy between BA and other organizational systems and identify a set of organizational practices that underlie the emergence of BA-enabled organizational systems. We use a case study involving a large IT firm to identify the organizational practices associated with synergistic relationships that lead to the emergence of higher-order BA-enabled organizational systems.