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- Budgetary slack (3)
- Earnings management (2)
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- Agent cheap talk (1)
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- Marginal tax rates (1)
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- Moral frame (1)
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- Noisy performance measures (1)
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Articles 1 - 12 of 12
Full-Text Articles in Business
The Robustness Of Honesty Effects On Budget Proposals When The Superior Has Rejection Authority, Jeremy Douthit, Douglas E. Stevens
The Robustness Of Honesty Effects On Budget Proposals When The Superior Has Rejection Authority, Jeremy Douthit, Douglas E. Stevens
Accountancy Faculty Publications
Rankin, Schwartz, and Young (2008) find experimental evidence that manipulating whether the budget request of the subordinate requires a factual assertion has no effect on budgetary slack when the superior can reject the budget. This calls into question the role of honesty in participative budgeting settings. Using Rankin et al.'s (2008) manipulation to capture honesty effects, we examine the robustness of honesty effects on budget proposals when the superior has rejection authority in two experiments. In Experiment 1, we document that honesty has a strong effect on budgetary slack when the salience of distributional fairness is reduced by withholding the …
Can A Code Of Ethics Improve Manager Behavior And Investor Confidence? An Experimental Study, Bruce I. Davidson, Douglas E. Stevens
Can A Code Of Ethics Improve Manager Behavior And Investor Confidence? An Experimental Study, Bruce I. Davidson, Douglas E. Stevens
Accountancy Faculty Publications
Policy makers and corporations have recently emphasized a code of ethics as an effective aspect of corporate governance. The corporate governance literature in accounting, however, provides little empirical or theoretical support for this emphasis. We address this gap between public policy and the literature by studying the effectiveness of a code of ethics in an experimental setting. Using Bicchieri's (2006) model of social norm activation, we predict that a code of ethics will improve manager return behavior and investor confidence to the extent that it activates social norms that control opportunistic behavior. Further, we predict that adding a certification choice …
Can Agent Cheap Talk Mitigate Agency Problems In The Presence Of A Noisy Performance Measure? An Experimental Test In A Single- And Multi-Period Setting, Jeremy Douthit, Linwood Kearney, Douglas E. Stevens
Can Agent Cheap Talk Mitigate Agency Problems In The Presence Of A Noisy Performance Measure? An Experimental Test In A Single- And Multi-Period Setting, Jeremy Douthit, Linwood Kearney, Douglas E. Stevens
Accountancy Faculty Publications
Given traditional agency theory assumptions and unobservable effort in a single-period setting, a moral hazard arises in which the agent is expected to shirk and provide the minimal possible effort after contracting with the principal. Traditional solutions to this agency problem include paying the agent a financial incentive tied to some noisy measure of performance or allowing the agent to develop a reputation over multiple periods. As the noisiness of the performance-measure increases, however, these traditional solutions become increasingly costly and ineffective. In many single- and multi-period agency settings in the firm, however, the agent can communicate a promised level …
The Role Of Dividend Policy In Real Earnings Management, Nan Liu
The Role Of Dividend Policy In Real Earnings Management, Nan Liu
Accountancy Dissertations
Given the importance of historical dividend policy to firms, I investigate whether dividend payers manipulate earnings through real activities to smooth dividend levels and dividend payout ratios. Using Compustat’s Execucomp database, I find evidence that dividend policy impacts both upward and downward real earnings management. I find that payers manipulate earnings upward through real activities to mitigate the shortfall of pre-managed earnings relative to prior year dividends when pre-managed earnings are lower than dividends paid in the prior year, suggesting that dividend levels are an important earnings benchmark. I document a stronger relationship between changes in pre-managed earnings and real …
Earnings Smoothness And Investment Sensitivity To Stock Prices, Xiaochuan Huang
Earnings Smoothness And Investment Sensitivity To Stock Prices, Xiaochuan Huang
Accountancy Dissertations
Existing research suggests that market misvaluations affect corporate investment, often leading to suboptimal investment. I examine whether earnings smoothness reduces the impact of market valuations on corporate investment and in turn enhances investment efficiency. I find that earnings smoothness has a strong negative effect on the sensitivity of corporate investment to stock prices. Further analyses indicate that this negative effect is driven by both innate and discretionary components of earnings smoothness and is more pronounced for firms operating in more volatile business environments. I complement these findings by demonstrating that firms with smoother earnings have lower over- (under-)investment and higher …
The Effect Of Regulatory Pressures On Earnings Management Behavior Of Nonprofit Hospitals, Brian A. Vansant
The Effect Of Regulatory Pressures On Earnings Management Behavior Of Nonprofit Hospitals, Brian A. Vansant
Accountancy Dissertations
My study examines the effect of regulatory pressures on the earnings management behavior of nonprofit (i.e., tax-exempt) hospitals. Prior research provides evidence that managers of nonprofit hospitals manage reported earnings to a range just above zero profit in order to conform to regulator low or zero profit expectations. I extend this research by investigating how reported performance on another accounting measure important to regulators, (i.e., charity care), further explains the earnings management behavior of nonprofit hospitals. Specifically, I develop theory to predict that nonprofit hospitals use discretionary accruals to manage positive earnings toward regulator low profit expectations less aggressively when …
Determinants Of Moral Judgments Regarding Budgetary Slack:An Experimental Examination Of Pay Scheme And Personal Values, Jessen L. Hobson, Mark J. Mellon, Douglas E. Stevens
Determinants Of Moral Judgments Regarding Budgetary Slack:An Experimental Examination Of Pay Scheme And Personal Values, Jessen L. Hobson, Mark J. Mellon, Douglas E. Stevens
Accountancy Faculty Publications
We study moral judgments regarding budgetary slack made by participants at the end of a participative budgeting experiment in which an expectation for a truthful budget was present. We find that participants who set budgets under a slackinducing pay scheme, and therefore built relatively high levels of budgetary slack, judged significant budgetary slack to be unethical on average, whereas participants who set budgets under a truth-inducing pay scheme did not. This suggests that the slack-inducing pay scheme generated a moral frame by setting economic self-interest against common social norms such as honesty or responsibility. We also find that participants who …
How Does Engagement Risk And The Focus Of The Pcaob Inspection Process Influence Internal Auditors' Reliance Decisions?, Julie A. Petherbridge
How Does Engagement Risk And The Focus Of The Pcaob Inspection Process Influence Internal Auditors' Reliance Decisions?, Julie A. Petherbridge
Accountancy Dissertations
With the passage of Sarbanes-Oxley in 2002, external auditors face a new regulatory inspection process in addition to an increase in litigation (or engagement) pressure. It has been communicated that this new inspection process will place an increased emphasis on the efficiency of integrated audits while maintaining the same level of effectiveness. In an experiment, I explore how external auditors’ reliance decisions on the internal audit function will be affected by different inspection focuses, varying levels of engagement risk, and the level of risk associated with the audit test or procedure. While I expect that there will be significant main …
Public And Private Forms Of Opportunism Within The Organization: A Joint Examination Of Budget And Effort Behavior, Jeffrey W. Schatzberg, Douglas E. Stevens
Public And Private Forms Of Opportunism Within The Organization: A Joint Examination Of Budget And Effort Behavior, Jeffrey W. Schatzberg, Douglas E. Stevens
Accountancy Faculty Publications
We assert that some forms of opportunistic behavior within the organization are relatively transparent and, therefore, public in nature. Further , while organizations can tightly control such public opportunism, it may not be optimal for them to do so in the presence of private opportunism. To study how public and private forms of opportunism differ and interact, we jointly examine budget and effort behavior in a participative budgeting experiment. We group participants into producer /manager pairs and set the parameters such that the producer extracts the largest share of surplus from the manager by publicly setting the budget at zero …
The Relationship Between R&D Investment And Dividend Payment Tax Incentives And Their Role In The Dividend Tax Puzzle, Mary Catherine Cleaveland
The Relationship Between R&D Investment And Dividend Payment Tax Incentives And Their Role In The Dividend Tax Puzzle, Mary Catherine Cleaveland
Accountancy Dissertations
Although much research on corporate dividend policy exists, the evidence is far from conclusive. Understanding how dividend taxes affect firm-level decisions is crucial to evaluating dividend imputation credits which provide shareholder-level tax credits for dividends received or decreased shareholder-level dividend tax rates, which reduce the double taxation of dividends. Using changes in New Zealand and Australia’s tax regimes, this dissertation provides new evidence on the relationship between tax incentives for R&D investment and dividend payment. The results show that the theory that the tension between R&D investment and dividend payment decreases when a country previously not offering tax incentives for …
The Effects Of Reputation And Ethics On Budgetary Slack, Douglas E. Stevens
The Effects Of Reputation And Ethics On Budgetary Slack, Douglas E. Stevens
Accountancy Faculty Publications
This experimental study tests the effects on budgetary slack of two potential controls for opportunistic self-interestóreputation and ethics. I manipulate the level of information asymmetry between the subordinate and the superior regarding productive capability and measure the subordinateís reputation and ethical concerns regarding budgetary slack. In this setting, I examine how information asymmetry affects reputation and ethical concerns, and test the effects of these concerns on budgetary slack. Consistent with prior findings, subordinates restrict the slack in their budgets to well below the maximum under a slackinducing pay scheme, even after five periods of experience. Budgetary slack is negatively associated …
Using Analysts’ Forecasts To Measure Properties Of Analysts’ Information Environment, Orie E. Barron, Oliver Kim, Steve C. Lim, Douglas E. Stevens
Using Analysts’ Forecasts To Measure Properties Of Analysts’ Information Environment, Orie E. Barron, Oliver Kim, Steve C. Lim, Douglas E. Stevens
Accountancy Faculty Publications
This paper presents a model that relates properties of the analysts' information environment to the properties of their forecasts. First, we express forecast dispersion and error in the mean forecast in terms of analyst uncertainty and consensus (that is, the degree to which analysts share a common belief). Second, we reverse the relations to show how uncertainty and consensus can be measured by combining forecast dispersion, error in the mean forecast, and the number of forecasts. Third, we show that the quality of common and private information available to analysts can be measured using these same observable variables. The relations …