Journal of Management
Accounting Research
2008, Volume 20 Special Issue
Contents
SPECIAL ISSUE
The Effect of Task Interdependence and Type of Incentive Contract on Group Performance
Ronald N. Guymon, Ramji Balakrishnan, Richard M. Tubbs
Abstract: We extend Fisher et al. (2003) to investigate the effectiveness of a budgetbased incentive contract to settings with alternate task characteristics.We first replicate their finding: when groups perform a task with an additive production function, a budget-based contract leads to higher levels of performance than a piece-rate contract. However, we do not find higher performance when we modify the task to be interdependent, arguably a key feature of group tasks. We also show that goal commitment mediates the incentive contract-performance relation for tasks with an additive production function. Collectively, these results suggest that variations in production technology influence the relative motivational effectiveness of different incentive plans.
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Managerial Influencing of Boards of Directors
George Drymiotes
Abstract: In this paper, I examine issues relating to managers’ ability to influence their performance evaluation. In contrast to conventional wisdom, I show that such influencing is not necessarily deleterious to shareholder welfare, despite the fact that it is aimed at maximizing the managers’ compensation. In particular, I show that the managers’ influencing actions can, under some conditions, improve the performance evaluation process. This mitigates the control problem between the boards of directors and managers, and lowers managerial compensation costs. I also show that managers’ influencing actions can alleviate the need for costly board equity awards to align board interests with those of the shareholders. This suggests that boards with smaller equity stakes may not necessarily have weaker incentives to monitor managers.
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Assessing JIT Performance: An Econometric Approach
Adam S. Maiga and Fred A. Jacobs
Abstract: This paper uses a sample of 131 just-in-time (JIT) firms and their matched non-JIT firms obtained from Kinney and Wempe with 1977–1995 Compustat data to assess whether the relationship between JIT adoption and firm performance is endogenous. Results indicate a significant positive association between JIT adoption and firm performance and strongly indicate that the decision to adopt JIT is endogenous. We also show that asset productivity, sales growth, and leverage, are important in
explaining the effect of JIT adoption on performance and that firm characteristics are an important contributor to unobserved heterogeneity. Furthermore, the econometric analyses in the form of both Wooldridge 2SLS and Heckman approaches suggest that the underlying relationship between JIT adoption and performance is much stronger after controlling for endogeneity and self-selection bias and that OLS estimates are indeed biased.
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Toward an Understanding of the Sophistication of Product Costing Systems
John A. Brierley
Abstract: Prior research into the sophistication of product costing systems has defined sophistication in terms of the methods used to include indirect overhead costs in product costs. Based on data collected from a questionnaire and field study interviews
with British management accountants, 16 different definitions of sophistication were discovered, and the three main definitions were: (1) the assignment of indirect overhead costs to product costs, (2) the inclusion of all costs in product costs, and (3)
the understandability of product costs by nonaccountants. When these three types of sophistication were measured by the number of cost pools and the number of cost drivers, all of the product costing systems were simple. Both of these measures of sophistication were unrelated to the management accountants’ satisfaction with the accuracy of product costs. The implication of these findings is that the term sophistication is too broad to have any meaning in relation to product costing systems. Given that sophistication can be defined in many different ways, research should concentrate on studying narrowly defined issues such as the three definitions of sophistication identified above. As satisfaction with product cost accuracy was not related to the number of cost pools and the number of cost drivers used in product costing systems, the importance of the treatment of overhead to increasing management accountants’ satisfaction with the accuracy of product costs seems to be overstated.
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An Empirical Analysis of the Incentive-Action-Performance Chain of the Principal-Agent Model
Jeffrey L. Callen, Mindy Morel and Christina Fader
Abstract: This study empirically investigates the incentive-action-performance chain, on cross-sectional plant data in the context of a just-in-time (JIT) plant manufacturing environment. Incentives in this study are of the ‘‘soft’’ goal-oriented variety rather than direct compensation. The empirical analysis is implemented using ordinary least squares and Heckman two-stage regressions to account for the potential endogeneity of the JIT adoption decision. We find that plant performance outcomes are associated with actions, namely, the breadth and intensities of plant JIT practices adopted by plant management, but are not associated with performance incentives. However, we find that the JIT adoption decision is associated with incentives. We further find that it is the essential inventory incentive aspects of JIT, such as increasing inventory turns and reducing scrap/waste, that motivate JIT adoption rather than other, arguably less central incentive aspects of JIT, such as product quality. Overall, our results are consistent with the predictions of the implicit ‘‘career’’ incentives Principal-Agent model but not with predictions of the standard explicit incentives Principal-Agent model.
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Organizational Founding, Strategic Renewal, and the Role of Accounting: Management Accounting Concepts in the Formation of the “Penny Post”
Alan J. Richardson
Abstract: Organizational strategies, processes, and procedures may become institutionalized during the early history of an organization, leading to dysfunctional rigidities when the environment changes. The postal system worldwide is under significant pressure to change its business model, including rescinding the provision of universal service and uniform pricing, as the posts are privatized and opened to competition. Cost accounting has become a key mechanism to achieve reform in the postal system. But is the introduction of a cost-based logic new to the design of post office reforms? Were the core policies of the post office originally developed without reference to cost? This paper analyzes the key document in the creation of the current postal business model: Rowland Hill’s (1837) ‘‘Post Office Reform: Its Importance and Practicability.’’ The pamphlet shows a basic understanding of economic concepts including the elasticity of demand and opportunity costs as well as implementing practical accounting techniques
that we now call value chain analysis, cost behavior analysis, activity-based costing and activity-based management, and target costing. This paper provides an analysis of Hill’s logic from the perspective of current management accounting techniques and terminology. It illustrates the use of management accounting in the reformation of social institutions and provides a rare example of the early decision-making use of management accounting concepts.
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An Overview and Assessment of Contemporary Management Accounting Research in China
Rong-Ruey Duh, Jason Zezhong Xiao and Chee W. Chow
Abstract: This paper provides an overview of 283 management accounting articles published in 18 major Chinese academic journals from 1997 to 2005. We find significantly different topic mixes between the periods 1997 to 2001 and 2002 to 2005. In terms of research method, normative/conceptual papers dominate in both subperiods, followed in descending order by case studies, surveys, field-archival studies, and analytical modeling research. About 80 percent of the papers do not have any explicit or detectable application of theory. Finally, considerable overlap exists between the articles’ topical coverage and issues considered important by managers. Overall, due to lack of theory application and other methodological limitations, this literature has not yet built a strong basis for understanding and leading management accounting development in China. Thus, we further examine the journals’ selection standards and processes, as well as factors that may have influenced Chinese scholars’ research ability, incentives, and focus. We conclude by offering suggestions for future development.
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Useful Additional Evaluation Measures
Joel S. Demski, John C. Fellingham and Haijin H. Lin
Abstract: Performance evaluation with multiple tasks and multiple measures has been explored in a variety of settings. Yet, the efficient design of a portfolio of performance measures remains opaque, largely because of the multidimensional nature of the exercise. Here we focus on the value of adding measures to an existing portfolio of measures in a multi-task LEN-style agency model. We offer an algebraic decomposition that projects the gain from a set of additional performance measures into ‘‘distance’’ and ‘‘risk’’ components. The distance component comports with task balance and intensity issues and the risk component with the inevitable risk sharing or compensating wage differential issue.
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The Contribution of the Harvard Business School to Management Control, 1908–1980
Stephen A. Zeff
Abstract: This paper documents and discusses the evolution of management control, which includes management and financial accounting, in the Harvard Business School (HBS) from 1908 to 1980. Primary emphasis is placed on the roles of the key movers, Ross G. Walker and Robert N. Anthony. The successive alterations in the configuration and content of the MBA courses in the Business School, based on a reading of the course catalogues, faculty papers and other documents on file in Baker Library, and interviews and correspondence with many of the principals, together with an examination of the series of text- and casebooks published by HBS accounting faculty, are the factual basis for this historical study. Concomitant developments at Massachusetts Institute of Technology and the University of Chicago are also brought into the analysis. An appendix contains a complete list of the HBS accounting faculty during the time span under study.
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Editorial Policy and Style Information No Abstract
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