An International Meeting of the American Accounting Association American Accounting Association 2006 Annual Meeting August 6–9, 2006 Washington, D.C.

Walter Aerts
University of Antwerp

Tom Van Caneghem
Ehsal - European University College Brussels

Abstract: In this paper we study conformity tendencies in SG&A reporting from a mimetic imitation perspective. A firm’s SG&A attract significant public attention. At the same time overhead cost control is ambiguous in terms of indeterminate means-ends relationships and overhead cost allocation methods lack authoritative guidance. These characteristics make SG&A reporting prone to social comparison processes. We explore intra-industry conformity tendencies in reported SG&A over a ten-year period among a sample of US firms. We measure conformity by comparing a firm’s SG&A profile against a reference group of industry model firms. Results suggest that a firm’s imitation of successful firms’ SG&A profiles is determined by the tendency of other industry members to imitate those reference models. Moreover, results suggest that the mimetic process is strengthened with higher environmental uncertainty and that large auditor networks function as facilitators for this type of socially based imitation.

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