The question of market efficiency is one of the most important, intriguing and debated issues in finance. The efficient market hypothesis states that the current market price of an asset reflects all the available information concerning the asset, and, therefore, this information cannot be used to predict future prices and earn excess returns. However, in order for the price to incorporate new information, some actions must be performed by traders that receive the information. Therefore, some time must elapse until a new equilibrium state is reached. How long does this take? We study the issue of convergence to eefficiency at the Tel-Aviv Stock Exchange. We examine various parameters that can be predictive of the returns, including features of the limit order book. Furthermore, we take trading fees into account and conclude that some form of market efficiency holds even at the smallest time horizon.
{"title":"Market E fficiency at the Tel-Aviv Stock Exchange","authors":"Bella Dubrov, Gal Zahavi","doi":"10.2139/ssrn.2200983","DOIUrl":"https://doi.org/10.2139/ssrn.2200983","url":null,"abstract":"The question of market efficiency is one of the most important, intriguing and debated issues in finance. The effi\u000ecient market hypothesis states that the current market price of an asset reflects all the available information concerning the asset, and, therefore, this information cannot be used to predict future prices and earn excess returns. However, in order for the price to incorporate new information, some actions must be performed by traders that receive the information. Therefore, some time must elapse until a new equilibrium state is reached. How long does this take? We study the issue of convergence to e\u000eefficiency at the Tel-Aviv Stock Exchange. We examine various parameters that can be predictive of the returns, including features of the limit order book. Furthermore, we take trading fees into account and conclude that some form of market effi\u000eciency holds even at the smallest time horizon.","PeriodicalId":356551,"journal":{"name":"American Accounting Association Meetings (AAA)","volume":"21 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2012-03-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114760343","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper investigates the changes in firm value triggered by corporate tax rate changes for which firms have balances on deferred tax allowances and deferred tax assets. The effects on both investment to fixed/current assets are well taken care of with embedded production functions and firm investment decisions change over time through the accumulated process of retained earnings on the simulated future path. The study is based on micro-simulations, and the data covers the period 2000 to 2008. We note the tax loss carry-forward allowances and net changes in the deferred tax assets affect the equity account and our simulation results demonstrate that the changes in corporate tax rates can enhance market value of equity in most cases, while there are some cases in which the effects are neutral or even detrimental for firm values. With our result both firm financial managers and government regulators must watch very closely the current balance statement status of firm.
{"title":"Effects of Corporate Tax Rate Cuts on Firm Investment and Valuation: A Micro Simulation Approach","authors":"Keiichi Kubota, Hitoshi Takehara","doi":"10.2139/ssrn.1905552","DOIUrl":"https://doi.org/10.2139/ssrn.1905552","url":null,"abstract":"This paper investigates the changes in firm value triggered by corporate tax rate changes for which firms have balances on deferred tax allowances and deferred tax assets. The effects on both investment to fixed/current assets are well taken care of with embedded production functions and firm investment decisions change over time through the accumulated process of retained earnings on the simulated future path. The study is based on micro-simulations, and the data covers the period 2000 to 2008. We note the tax loss carry-forward allowances and net changes in the deferred tax assets affect the equity account and our simulation results demonstrate that the changes in corporate tax rates can enhance market value of equity in most cases, while there are some cases in which the effects are neutral or even detrimental for firm values. With our result both firm financial managers and government regulators must watch very closely the current balance statement status of firm.","PeriodicalId":356551,"journal":{"name":"American Accounting Association Meetings (AAA)","volume":"12 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2011-08-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"115643106","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We posit that accounting conservatism could mitigate the value destruction associated with increases in cash holdings. Consistent with this conjecture, we find that the market value of an additional dollar in cash holdings increases in accounting conservatism. This result is robust to controlling for strength of corporate governance, earnings quality, past stock performance, potential unobserved firm heterogeneity, potential endogenous changes in conservatism, and other relevant variables. Overall, the evidence suggests that accounting conservatism is associated with a more efficient use of cash holdings, supporting the notion that accounting conservatism can serve as a substitute for external monitoring and reduce agency conflicts between managers and shareholders.
{"title":"Value of Cash Holdings and Accounting Conservatism","authors":"Henock Louis, Amy X. Sun, Oktay Urcan","doi":"10.2139/ssrn.1415562","DOIUrl":"https://doi.org/10.2139/ssrn.1415562","url":null,"abstract":"We posit that accounting conservatism could mitigate the value destruction associated with increases in cash holdings. Consistent with this conjecture, we find that the market value of an additional dollar in cash holdings increases in accounting conservatism. This result is robust to controlling for strength of corporate governance, earnings quality, past stock performance, potential unobserved firm heterogeneity, potential endogenous changes in conservatism, and other relevant variables. Overall, the evidence suggests that accounting conservatism is associated with a more efficient use of cash holdings, supporting the notion that accounting conservatism can serve as a substitute for external monitoring and reduce agency conflicts between managers and shareholders.","PeriodicalId":356551,"journal":{"name":"American Accounting Association Meetings (AAA)","volume":"185 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2011-08-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114481529","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Recent economics literature shows renewed interest in models of Bertrand competition with cost uncertainty. We continue this reexamination and introduce cost correlation as a way to mitigate the asymmetry of information between firms facing Bertrand competition. We also allow firms to make an investment to decrease the variance of their cost signals. Our results demonstrate that when the firms’ choices of precision of their cost signals are observable, all firms will choose to be uninformed about their marginal costs and price at the average equilibrium price. On the other hand, with unobservable choices of precision, firms will choose as precise information as possible within the cost-benefit trade-off. Because of the correlation between the firms’ marginal costs, the increased precision of the cost signals not only provides better information about a firm’s own cost but also allows the firm to better infer the rivals’ costs and better anticipate their pricing choices.
{"title":"Bertrand Competition, Market Information and Observability","authors":"C. Callahan, Emily Keenan","doi":"10.2139/ssrn.1910339","DOIUrl":"https://doi.org/10.2139/ssrn.1910339","url":null,"abstract":"Recent economics literature shows renewed interest in models of Bertrand competition with cost uncertainty. We continue this reexamination and introduce cost correlation as a way to mitigate the asymmetry of information between firms facing Bertrand competition. We also allow firms to make an investment to decrease the variance of their cost signals. Our results demonstrate that when the firms’ choices of precision of their cost signals are observable, all firms will choose to be uninformed about their marginal costs and price at the average equilibrium price. On the other hand, with unobservable choices of precision, firms will choose as precise information as possible within the cost-benefit trade-off. Because of the correlation between the firms’ marginal costs, the increased precision of the cost signals not only provides better information about a firm’s own cost but also allows the firm to better infer the rivals’ costs and better anticipate their pricing choices.","PeriodicalId":356551,"journal":{"name":"American Accounting Association Meetings (AAA)","volume":"52 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2011-08-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128589479","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pornpan Damrongsukniwat, Danuja Kunpanitchakit, S. Durongwatana
The new approach of budgetary slack measurement is introduced and used in the empirical investigation of the association between budgetary slack and its determinants. Comparisons of the results with other budgetary slack measurements are provided. Prior survey studies usually measure budgetary slack using management perceptions of the budget achievability. In this study, the ex post measure of firm’s annual budget achievability with the exclusion of earnings management through discretionary accruals has been used in an attempt to objectively measure budgetary slack. Both primary data from mailed survey questionnaires and secondary data from the annual financial statements are utilized in the analysis. The survey data on budget figures of the year 2009, perceived budget achievability, and all determinants are gleaned from 38 respondents working in the corporate level of listed non-financial firms in Thailand to match their firms’ annual financial statements, and the cross-sectional modified Jones (1995) model is employed to estimate discretionary accruals. Various determinants of budgetary slack are combined and classified into three categories: environmental factor, organizational factors, and individual factors. The study further examines those determinants on budgetary slack and compares their association with each budgetary slack measurement. The results show that the suggested measurement and the traditional measurement of budgetary slack are significantly, positively correlated and the association between budgetary slack and its determinants is relatively sensitive to the measurements of budgetary slack. This study contributes to prior literature an objective measure of budgetary slack. The respondents in this study are corporate management who involve extensively in budgeting process and are accountable for firms’ performance. Hence, the results in this study may suggest new evidence of organizational level.
{"title":"The Measurements and Determinants of Budgetary Slack: Empirical Evidence of Listed Companies in Thailand","authors":"Pornpan Damrongsukniwat, Danuja Kunpanitchakit, S. Durongwatana","doi":"10.2139/ssrn.1909326","DOIUrl":"https://doi.org/10.2139/ssrn.1909326","url":null,"abstract":"The new approach of budgetary slack measurement is introduced and used in the empirical investigation of the association between budgetary slack and its determinants. Comparisons of the results with other budgetary slack measurements are provided. Prior survey studies usually measure budgetary slack using management perceptions of the budget achievability. In this study, the ex post measure of firm’s annual budget achievability with the exclusion of earnings management through discretionary accruals has been used in an attempt to objectively measure budgetary slack. Both primary data from mailed survey questionnaires and secondary data from the annual financial statements are utilized in the analysis. The survey data on budget figures of the year 2009, perceived budget achievability, and all determinants are gleaned from 38 respondents working in the corporate level of listed non-financial firms in Thailand to match their firms’ annual financial statements, and the cross-sectional modified Jones (1995) model is employed to estimate discretionary accruals. Various determinants of budgetary slack are combined and classified into three categories: environmental factor, organizational factors, and individual factors. The study further examines those determinants on budgetary slack and compares their association with each budgetary slack measurement. The results show that the suggested measurement and the traditional measurement of budgetary slack are significantly, positively correlated and the association between budgetary slack and its determinants is relatively sensitive to the measurements of budgetary slack. This study contributes to prior literature an objective measure of budgetary slack. The respondents in this study are corporate management who involve extensively in budgeting process and are accountable for firms’ performance. Hence, the results in this study may suggest new evidence of organizational level.","PeriodicalId":356551,"journal":{"name":"American Accounting Association Meetings (AAA)","volume":"29 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2011-08-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"121213550","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Taxation is an important component of the knowledge base that certified public accountants (CPAs) are assumed to understand, by mere association. Whether or not CPAs, in general, actually possess enough taxation education and /or experience to warrant this reputation of prowess is a debatable matter. This paper will explore those presuppositions, restate selected previous research involving accounting education in taxation, and evaluate various educational delivery methods that might be utilized to prepare accountants to face tax issues in the real world, from the view of a veteran accounting practitioner turned enthusiastic accounting educator.
{"title":"Raising the Bar: Income Tax Education at the Undergraduate Level","authors":"J. Weber","doi":"10.2139/ssrn.1799045","DOIUrl":"https://doi.org/10.2139/ssrn.1799045","url":null,"abstract":"Taxation is an important component of the knowledge base that certified public accountants (CPAs) are assumed to understand, by mere association. Whether or not CPAs, in general, actually possess enough taxation education and /or experience to warrant this reputation of prowess is a debatable matter. This paper will explore those presuppositions, restate selected previous research involving accounting education in taxation, and evaluate various educational delivery methods that might be utilized to prepare accountants to face tax issues in the real world, from the view of a veteran accounting practitioner turned enthusiastic accounting educator.","PeriodicalId":356551,"journal":{"name":"American Accounting Association Meetings (AAA)","volume":"20 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2011-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"134378237","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper examines the impacts of two attributes of accounting recognition, i.e., nonlinearity and multi-period lags, on Basu (1997) measure of asymmetric timeliness. First, we predict and find that asymmetric timeliness is affected by nonlinear earnings responses and more pronounced when news of large absolute magnitudes occurs. Results also show that the time trend in asymmetric timeliness may be confounded by nonlinearity. Next, we examine lagged earnings responses to good news and bad news and hypothesize that positive differential earnings responses exist in the current and sufficiently short following periods, indicating differential earnings responses do not only exist concurrently. We also predict differential earnings responses turn negative, showing positive differential earnings responses reverse as lag increases. Besides, we hypothesize that differential earnings responses decay as lag increases. Empirical results are all consistent with our expectations. Our results are robust to several changes in model or sample specifications. Possible methods to compare the extents of conservatism when considering nonlinearity and multi-period lags are also provided in our study. Collectively, our empirical results suggest that nonlinearity in earnings responses and multi-period earnings responses rather than a single-period asymmetric timeliness measure should be considered to measure conservatism more validly.
{"title":"Effects of Nonlinearity and Multi-Period Lags on Basu (1997) Measure","authors":"Chi-Chun Liu, Chun-Yang Lin","doi":"10.2139/ssrn.1779827","DOIUrl":"https://doi.org/10.2139/ssrn.1779827","url":null,"abstract":"This paper examines the impacts of two attributes of accounting recognition, i.e., nonlinearity and multi-period lags, on Basu (1997) measure of asymmetric timeliness. First, we predict and find that asymmetric timeliness is affected by nonlinear earnings responses and more pronounced when news of large absolute magnitudes occurs. Results also show that the time trend in asymmetric timeliness may be confounded by nonlinearity. Next, we examine lagged earnings responses to good news and bad news and hypothesize that positive differential earnings responses exist in the current and sufficiently short following periods, indicating differential earnings responses do not only exist concurrently. We also predict differential earnings responses turn negative, showing positive differential earnings responses reverse as lag increases. Besides, we hypothesize that differential earnings responses decay as lag increases. Empirical results are all consistent with our expectations. Our results are robust to several changes in model or sample specifications. Possible methods to compare the extents of conservatism when considering nonlinearity and multi-period lags are also provided in our study. Collectively, our empirical results suggest that nonlinearity in earnings responses and multi-period earnings responses rather than a single-period asymmetric timeliness measure should be considered to measure conservatism more validly.","PeriodicalId":356551,"journal":{"name":"American Accounting Association Meetings (AAA)","volume":"2 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2011-03-07","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125909987","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Recent research on cost behavior has revealed that costs do not change proportionately with changes in sales, showing that costs increase in response to increases in sales, but do not decline proportionately with reductions in sales. This asymmetric cost behavior is termed as “sticky costs.” One of the hypotheses on costs stickiness explains it as a phenomenon that results from the deliberate decisions of managers. When managers are faced with a decline in sales, there are some who consider the decline to be temporary, and expect sales to rebound in the near future; thus, there are managers who, deliberately, hold onto resources during periods of declining sales. Such behavior is justified when, in the long run, retaining resources could result in lower costs, thus higher profits, than eliminating resources in response to declining sales and reacquiring them in times of increasing sales. This hypothesis, however, has not been directly examined in the previous research. Managers’ prospect of future sales has not been incorporated into analyses in any of the previous works. In this paper, we use sales forecasts issued by managers as a proxy for managers’ prospect of future sales and examine the hypothesis that costs stickiness is the results of the deliberate decision of managers by empirically testing whether the managers’ sales forecasts have an impact on costs stickiness. We find that the prospect of future sales is related to current level of costs stickiness. Our findings provide the strong evidence that costs stickiness is the results of deliberate decision of managers.
{"title":"Are 'Sticky Costs' the Result of Deliberate Decision of Managers?","authors":"Kenji Yasukata","doi":"10.2139/ssrn.1444746","DOIUrl":"https://doi.org/10.2139/ssrn.1444746","url":null,"abstract":"Recent research on cost behavior has revealed that costs do not change proportionately with changes in sales, showing that costs increase in response to increases in sales, but do not decline proportionately with reductions in sales. This asymmetric cost behavior is termed as “sticky costs.” One of the hypotheses on costs stickiness explains it as a phenomenon that results from the deliberate decisions of managers. When managers are faced with a decline in sales, there are some who consider the decline to be temporary, and expect sales to rebound in the near future; thus, there are managers who, deliberately, hold onto resources during periods of declining sales. Such behavior is justified when, in the long run, retaining resources could result in lower costs, thus higher profits, than eliminating resources in response to declining sales and reacquiring them in times of increasing sales. This hypothesis, however, has not been directly examined in the previous research. Managers’ prospect of future sales has not been incorporated into analyses in any of the previous works. In this paper, we use sales forecasts issued by managers as a proxy for managers’ prospect of future sales and examine the hypothesis that costs stickiness is the results of the deliberate decision of managers by empirically testing whether the managers’ sales forecasts have an impact on costs stickiness. We find that the prospect of future sales is related to current level of costs stickiness. Our findings provide the strong evidence that costs stickiness is the results of deliberate decision of managers.","PeriodicalId":356551,"journal":{"name":"American Accounting Association Meetings (AAA)","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2011-02-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130654321","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Behavioral aspects and attitudes toward the balanced scorecard (BSC) could be a determinant factor in the success of BSC implementation. In the study we examine the match between factors affecting employee buying into the BSC and corporate strategy and whether a fit between them is necessary to maximize the benefits of BSC implementation by enhancing corporate performance. Conforming to our expectations, we found that firms that carefully planned their strategic objectives were more likely to have a positive impact on their employees’ perception of the BSC. A deliberate strategy - or planned strategy - as defined by Mintzberg (1978) is associated with higher levels of BSC awareness, perception of BSC ease of use, perception of BSC usefulness, and intention to use the BSC. We also found that higher perceptions of BSC ease of use were positively associated with aspects of a firm’s performance, such as from the customer, internal processes, and learning and innovation perspectives. Hence, we conclude that firms implementing the BSC need to take into consideration that the successful implementation of the BSC requires careful planning to ensure that the firm’s strategic objectives are well formulated, fitted with BSC measures, and effectively communicated to BSC users.
{"title":"The Link Between Perception of BSC Implementation and Corporate Strategy and its Impact on Performance","authors":"Majidul Islam","doi":"10.2139/SSRN.1659845","DOIUrl":"https://doi.org/10.2139/SSRN.1659845","url":null,"abstract":"Behavioral aspects and attitudes toward the balanced scorecard (BSC) could be a determinant factor in the success of BSC implementation. In the study we examine the match between factors affecting employee buying into the BSC and corporate strategy and whether a fit between them is necessary to maximize the benefits of BSC implementation by enhancing corporate performance. Conforming to our expectations, we found that firms that carefully planned their strategic objectives were more likely to have a positive impact on their employees’ perception of the BSC. A deliberate strategy - or planned strategy - as defined by Mintzberg (1978) is associated with higher levels of BSC awareness, perception of BSC ease of use, perception of BSC usefulness, and intention to use the BSC. We also found that higher perceptions of BSC ease of use were positively associated with aspects of a firm’s performance, such as from the customer, internal processes, and learning and innovation perspectives. Hence, we conclude that firms implementing the BSC need to take into consideration that the successful implementation of the BSC requires careful planning to ensure that the firm’s strategic objectives are well formulated, fitted with BSC measures, and effectively communicated to BSC users.","PeriodicalId":356551,"journal":{"name":"American Accounting Association Meetings (AAA)","volume":"4 3 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2010-08-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123690510","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Lean thinking is rapidly becoming the dominant paradigm in manufacturing. Kennedy and Widener (2008) use a case study to develop a lean environment model that illustrates the importance of lean accounting practices. We build on this work using a congruence model of organizational design (Nadler & Tushman, 1992, 1997) to shed more in-depth insights on the role of value stream costing (VSC) and lean accounting practices that exist in a cross-section of manufacturing firms. Using data from 244 U.S. companies that have implemented lean principles, we test a structural equation model that examines the role VSC plays in the lean environment. We hypothesize and find that top management support is associated with lean manufacturing practices, which in turn are associated with a decreased emphasis on traditional management accounting practices and an increase in the lean accounting concepts of simplified accounting practices and VSC. We also find that VSC is associated with employee empowerment and the use of visual performance measures. We find the existence of a second, better fitting model that confirms the importance of VSC as a critical element in the lean environment. However, the alternative model supports VSC as the final outcome in the lean process, rather than an intermediate step, suggesting that in a cross-section of firms, lean accounting may be the laggard in the implementation of lean principles. This study provides evidence on the internal alignment of a firm’s manufacturing, accounting, and control environments in a lean context.
{"title":"Accounting for a Lean Environment","authors":"Frances A. Kennedy, S. Widener, R. Fullerton","doi":"10.2139/ssrn.1659386","DOIUrl":"https://doi.org/10.2139/ssrn.1659386","url":null,"abstract":"Lean thinking is rapidly becoming the dominant paradigm in manufacturing. Kennedy and Widener (2008) use a case study to develop a lean environment model that illustrates the importance of lean accounting practices. We build on this work using a congruence model of organizational design (Nadler & Tushman, 1992, 1997) to shed more in-depth insights on the role of value stream costing (VSC) and lean accounting practices that exist in a cross-section of manufacturing firms. Using data from 244 U.S. companies that have implemented lean principles, we test a structural equation model that examines the role VSC plays in the lean environment. We hypothesize and find that top management support is associated with lean manufacturing practices, which in turn are associated with a decreased emphasis on traditional management accounting practices and an increase in the lean accounting concepts of simplified accounting practices and VSC. We also find that VSC is associated with employee empowerment and the use of visual performance measures. We find the existence of a second, better fitting model that confirms the importance of VSC as a critical element in the lean environment. However, the alternative model supports VSC as the final outcome in the lean process, rather than an intermediate step, suggesting that in a cross-section of firms, lean accounting may be the laggard in the implementation of lean principles. This study provides evidence on the internal alignment of a firm’s manufacturing, accounting, and control environments in a lean context.","PeriodicalId":356551,"journal":{"name":"American Accounting Association Meetings (AAA)","volume":"53 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2010-08-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114703938","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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