Managerial response to stakeholders’ demands for profitability and sustainability can have long-lasting effects on organizations, stakeholders, and society. In an era dominated by business-case thinking, managers’ cognitive processes are particularly important. Yet alternatives to business-case thinking are underexamined. Operationally, to help direct attention toward sustainable goals, organizations implement performance measurement systems (PMS) with varying scope differences in the composition of financial and nonfinancial measures. To date prior research is inconclusive regarding the effectiveness of such actions. This study responds by mobilizing paradoxical thinking, an alternative form of cognition posited to better support complex managerial decisions. Experimentally, I investigate how cognitive frames moderate the effect of a broad versus narrow PMS in sustainable decision making. The results reveal managers who approach sustainable decisions with a paradoxical cognitive frame and are evaluated using broad PMS select more sustainable suppliers. These findings are important given the social and environmental implications of sustainability judgments.
{"title":"The Interactive Effect of Cognitive Frame and Performance Measurement System Scope on Managers’ Choice of Sustainable Suppliers","authors":"Nadra Pencle","doi":"10.2308/jmar-2022-041","DOIUrl":"https://doi.org/10.2308/jmar-2022-041","url":null,"abstract":"\u0000 Managerial response to stakeholders’ demands for profitability and sustainability can have long-lasting effects on organizations, stakeholders, and society. In an era dominated by business-case thinking, managers’ cognitive processes are particularly important. Yet alternatives to business-case thinking are underexamined. Operationally, to help direct attention toward sustainable goals, organizations implement performance measurement systems (PMS) with varying scope differences in the composition of financial and nonfinancial measures. To date prior research is inconclusive regarding the effectiveness of such actions. This study responds by mobilizing paradoxical thinking, an alternative form of cognition posited to better support complex managerial decisions. Experimentally, I investigate how cognitive frames moderate the effect of a broad versus narrow PMS in sustainable decision making. The results reveal managers who approach sustainable decisions with a paradoxical cognitive frame and are evaluated using broad PMS select more sustainable suppliers. These findings are important given the social and environmental implications of sustainability judgments.","PeriodicalId":46474,"journal":{"name":"Journal of Management Accounting Research","volume":null,"pages":null},"PeriodicalIF":1.7,"publicationDate":"2023-06-28","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"45062278","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}
Although the integration of corporate social responsibility (CSR) into CEO compensation contracts (hereafter, CSR contracting) has become prevalent in recent years, scholars and practitioners are increasingly concerned about the quality of CSR contracting. Using hand-collected information of S&P 500 firms from proxy statements, I construct an empirical proxy for CSR contracting quality and show that the quality is higher when the compensation committee has more CSR-related expertise. Further, I find that CSR contracting quality is positively associated with future CSR performance, and this effect is stronger when compensation committee CSR expertise is higher. Overall, this evidence highlights the importance of compensation committees’ CSR-related expertise in designing high-quality CSR contracting and improving CSR contracting efficiency. Data Availability: All data are available from public sources mentioned in the text.
{"title":"Compensation Committee CSR-Related Expertise, CSR Contracting Quality, and Performance Implications","authors":"Lu Yang","doi":"10.2308/jmar-2022-047","DOIUrl":"https://doi.org/10.2308/jmar-2022-047","url":null,"abstract":"\u0000 Although the integration of corporate social responsibility (CSR) into CEO compensation contracts (hereafter, CSR contracting) has become prevalent in recent years, scholars and practitioners are increasingly concerned about the quality of CSR contracting. Using hand-collected information of S&P 500 firms from proxy statements, I construct an empirical proxy for CSR contracting quality and show that the quality is higher when the compensation committee has more CSR-related expertise. Further, I find that CSR contracting quality is positively associated with future CSR performance, and this effect is stronger when compensation committee CSR expertise is higher. Overall, this evidence highlights the importance of compensation committees’ CSR-related expertise in designing high-quality CSR contracting and improving CSR contracting efficiency.\u0000 Data Availability: All data are available from public sources mentioned in the text.","PeriodicalId":46474,"journal":{"name":"Journal of Management Accounting Research","volume":null,"pages":null},"PeriodicalIF":1.7,"publicationDate":"2023-06-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"43538092","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}
Several high-profile companies have removed numerical subjective performance ratings from their performance-management processes in favor of only using narrative evaluations. Using an experiment, I examine whether requiring supervisors to provide a numerical subjective performance rating in addition to a narrative evaluation moderates the effects of supervisors’ directional evaluation incentives (i.e., reasons to evaluate an employee more or less favorably) on the favorability of their narrative evaluations. As predicted, I find the favorability of supervisors’ narrative evaluations reflects their directional evaluation incentives, but to a lesser degree when they also provide a numerical performance rating. Theory suggests the moderating effects of providing a numerical rating occur because (1) numerical ratings are biased toward the middle of the scale, and (2) supervisors strive for “consistency” between their numerical ratings and narrative evaluations. I demonstrate that the rating process affects narratives, and removing subjective numerical ratings may have unintended consequences in practice.
{"title":"Narratives in Subjective Performance Evaluations: Do Ratings Change the Narrative?","authors":"Kyle M. Stubbs","doi":"10.2308/jmar-2021-073","DOIUrl":"https://doi.org/10.2308/jmar-2021-073","url":null,"abstract":"\u0000 Several high-profile companies have removed numerical subjective performance ratings from their performance-management processes in favor of only using narrative evaluations. Using an experiment, I examine whether requiring supervisors to provide a numerical subjective performance rating in addition to a narrative evaluation moderates the effects of supervisors’ directional evaluation incentives (i.e., reasons to evaluate an employee more or less favorably) on the favorability of their narrative evaluations. As predicted, I find the favorability of supervisors’ narrative evaluations reflects their directional evaluation incentives, but to a lesser degree when they also provide a numerical performance rating. Theory suggests the moderating effects of providing a numerical rating occur because (1) numerical ratings are biased toward the middle of the scale, and (2) supervisors strive for “consistency” between their numerical ratings and narrative evaluations. I demonstrate that the rating process affects narratives, and removing subjective numerical ratings may have unintended consequences in practice.","PeriodicalId":46474,"journal":{"name":"Journal of Management Accounting Research","volume":null,"pages":null},"PeriodicalIF":1.7,"publicationDate":"2023-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"48700251","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 utilize two theoretical frameworks to explore the impact of nonprofit board networks on the ability to raise funds. Consistent with the information sharing perspective, we find that having more network connections leads to higher contributions. However, consistent with the finite resource perspective, we find that a higher connection intensity leads to lower contributions. Our additional tests suggest that larger nonprofits, nonprofits that invest more in fundraising, and those that are better governed are better able to take advantage of board connections and mitigate the negative consequences of connection intensity. Our findings suggest that the impact of nonprofit board networks on total contributions is complex and not one-sided.
{"title":"Nonprofit Board Network and Total Contributions","authors":"Xiaoting Hao, Daniel G. Neely","doi":"10.2308/jmar-2022-042","DOIUrl":"https://doi.org/10.2308/jmar-2022-042","url":null,"abstract":"\u0000 We utilize two theoretical frameworks to explore the impact of nonprofit board networks on the ability to raise funds. Consistent with the information sharing perspective, we find that having more network connections leads to higher contributions. However, consistent with the finite resource perspective, we find that a higher connection intensity leads to lower contributions. Our additional tests suggest that larger nonprofits, nonprofits that invest more in fundraising, and those that are better governed are better able to take advantage of board connections and mitigate the negative consequences of connection intensity. Our findings suggest that the impact of nonprofit board networks on total contributions is complex and not one-sided.","PeriodicalId":46474,"journal":{"name":"Journal of Management Accounting Research","volume":null,"pages":null},"PeriodicalIF":1.7,"publicationDate":"2023-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"41259631","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}
Mark Anderson, Ramji Balakrishnan, Ranjani Krishnan
This article documents and celebrates the immense contributions of Professor Rajiv Banker (1953–2023) to management accounting. After a brief history of his career, we document his prolific output and impact. We organize our overview of his contributions to management accounting into four broad streams, as follows: cost drivers and systems, managerial drivers of cost behavior, performance measurement and compensation, and data envelopment analysis for productivity measurement in organizations. JEL Classifications: M10; M40.
{"title":"Rajiv Banker: Management Accounting Virtuoso","authors":"Mark Anderson, Ramji Balakrishnan, Ranjani Krishnan","doi":"10.2308/jmar-2023-031","DOIUrl":"https://doi.org/10.2308/jmar-2023-031","url":null,"abstract":"\u0000 This article documents and celebrates the immense contributions of Professor Rajiv Banker (1953–2023) to management accounting. After a brief history of his career, we document his prolific output and impact. We organize our overview of his contributions to management accounting into four broad streams, as follows: cost drivers and systems, managerial drivers of cost behavior, performance measurement and compensation, and data envelopment analysis for productivity measurement in organizations.\u0000 JEL Classifications: M10; M40.","PeriodicalId":46474,"journal":{"name":"Journal of Management Accounting Research","volume":null,"pages":null},"PeriodicalIF":1.7,"publicationDate":"2023-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"49321251","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 examine whether the quality of a firm’s internal controls affects a board’s decision to hire an insider as CEO. We find that the board is less likely to select an insider as CEO following an internal control material weakness (ICMW) disclosure. In cross-sectional analyses, we find that the adverse effect of weak internal controls on the likelihood of hiring an insider CEO is attenuated for firms that restate past misstatements and is pronounced when boards are more independent. We also find that audit fees are lower for ICMW firms when an outsider CEO is appointed, indicating that external auditors perceive lower audit risk. Taken together, our findings suggest that in the presence of a weak internal control environment, the board prefers an outsider CEO over an insider who may have been a part of the internal control issues, notwithstanding the fact that evaluating the outsider CEO can be challenging.
{"title":"Internal Control and the Insider versus Outsider CEO Choice","authors":"Leah M. Baer, Inder K. Khurana, Hoyoun Kyung","doi":"10.2308/jmar-2021-022","DOIUrl":"https://doi.org/10.2308/jmar-2021-022","url":null,"abstract":"\u0000 We examine whether the quality of a firm’s internal controls affects a board’s decision to hire an insider as CEO. We find that the board is less likely to select an insider as CEO following an internal control material weakness (ICMW) disclosure. In cross-sectional analyses, we find that the adverse effect of weak internal controls on the likelihood of hiring an insider CEO is attenuated for firms that restate past misstatements and is pronounced when boards are more independent. We also find that audit fees are lower for ICMW firms when an outsider CEO is appointed, indicating that external auditors perceive lower audit risk. Taken together, our findings suggest that in the presence of a weak internal control environment, the board prefers an outsider CEO over an insider who may have been a part of the internal control issues, notwithstanding the fact that evaluating the outsider CEO can be challenging.","PeriodicalId":46474,"journal":{"name":"Journal of Management Accounting Research","volume":null,"pages":null},"PeriodicalIF":1.7,"publicationDate":"2023-05-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"42168301","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 examine the impact of unintentional biases in managerial judgment and in audited accounting information on the reporting of unverifiable private managerial information for stewardship purposes. Such biases are exogenous and irreducible; awareness of their existence does not eliminate bias or lead to heterogeneous beliefs—all agents have common, objective beliefs. We show that any biased managerial judgment in interpreting private information and negatively biased accounting (conservatism) reduce timely reporting of private managerial information by managers. Only positively biased (less conservative) accounting increases such reporting by managers. Contrary to conventional wisdom, negative accounting biases, instead of counteracting the effect of positive managerial bias, act to further reduce reporting by managers and, thus, the supply of timely information to capital markets. Thus, freedom from bias, both in managerial judgment and in accounting, more likely results in managers issuing timely reports.
{"title":"Unintentional Bias and Managerial Reporting","authors":"Florin Şabac, J. Tian","doi":"10.2308/jmar-2021-072","DOIUrl":"https://doi.org/10.2308/jmar-2021-072","url":null,"abstract":"\u0000 We examine the impact of unintentional biases in managerial judgment and in audited accounting information on the reporting of unverifiable private managerial information for stewardship purposes. Such biases are exogenous and irreducible; awareness of their existence does not eliminate bias or lead to heterogeneous beliefs—all agents have common, objective beliefs. We show that any biased managerial judgment in interpreting private information and negatively biased accounting (conservatism) reduce timely reporting of private managerial information by managers. Only positively biased (less conservative) accounting increases such reporting by managers. Contrary to conventional wisdom, negative accounting biases, instead of counteracting the effect of positive managerial bias, act to further reduce reporting by managers and, thus, the supply of timely information to capital markets. Thus, freedom from bias, both in managerial judgment and in accounting, more likely results in managers issuing timely reports.","PeriodicalId":46474,"journal":{"name":"Journal of Management Accounting Research","volume":null,"pages":null},"PeriodicalIF":1.7,"publicationDate":"2023-05-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"49649945","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}
Pub Date : 2023-03-01DOI: 10.2308/1049-2127-35.1.i
{"title":"Covers and Front Matter","authors":"","doi":"10.2308/1049-2127-35.1.i","DOIUrl":"https://doi.org/10.2308/1049-2127-35.1.i","url":null,"abstract":"","PeriodicalId":46474,"journal":{"name":"Journal of Management Accounting Research","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2023-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"134949125","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}
Internal governance is the bottom-up governance mechanism within the top management team (hereinafter referred to as “TMT”) through which key subordinates internally monitor the CEO. We find that cost stickiness is negatively associated with internal governance after controlling for legitimate economic reasons of cost stickiness, suggesting that internal governance mitigates agency-based cost stickiness. Consistent with the agency explanation, the results show that the impact of internal governance on cost stickiness is stronger for firms with lower future value creation of SG&A costs. In addition, we document that the impact of internal governance on cost stickiness is more pronounced for firms with more effective board monitoring. This paper extends a growing literature that investigates the impact of internal governance on corporate decisions and complements existing studies on the role of various governance mechanisms in mitigating agency-based cost stickiness.
{"title":"Internal Governance and Cost Stickiness","authors":"Bo Zhang, Limei Yang, Ruixue Zhou","doi":"10.2308/jmar-2020-043","DOIUrl":"https://doi.org/10.2308/jmar-2020-043","url":null,"abstract":"Internal governance is the bottom-up governance mechanism within the top management team (hereinafter referred to as “TMT”) through which key subordinates internally monitor the CEO. We find that cost stickiness is negatively associated with internal governance after controlling for legitimate economic reasons of cost stickiness, suggesting that internal governance mitigates agency-based cost stickiness. Consistent with the agency explanation, the results show that the impact of internal governance on cost stickiness is stronger for firms with lower future value creation of SG&A costs. In addition, we document that the impact of internal governance on cost stickiness is more pronounced for firms with more effective board monitoring. This paper extends a growing literature that investigates the impact of internal governance on corporate decisions and complements existing studies on the role of various governance mechanisms in mitigating agency-based cost stickiness.","PeriodicalId":46474,"journal":{"name":"Journal of Management Accounting Research","volume":null,"pages":null},"PeriodicalIF":1.7,"publicationDate":"2022-11-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"47620830","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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