Practice-Informed Accounting Research: The Role of Macroeconomic Events and Changes in Financial Reporting and Disclosure

The Economic Effects of Federal Regulation of the Market for New Security Issues

This paper argues that the structure of corporate ownership varies systematically in ways that are consistent with value maximization. Among the variables that are empirically significant in explaining the variation in ownership structure for 511 U.S. corporations are firm size, instability of profit rate, whether or not the firm is a regulated utility or financial institution, and whether or not the firm is in the mass media or sports industry. Doubt is cast on the Berle-Means thesis, as no significant relationship is found between ownership concentration and accounting profit rates for this set of firms.

Agency Problems, Auditing, and the Theory of the Firm: Some EvidenceAuthor(s): Ross L. Watts and Jerold L. ZimmermanSource: Journal of Law and Economics, Vol. 26, No. 3, (Oct., 1983), pp. 613-633Published by: The University of Chicago PressStable URL: http://www.jstor.org/stable/725039Accessed: 29/06/2008 23:14

EUGENE FAMA and Michael Jensen's treatment of the "Separation of Ownership and Control" is both insightful and informative. It deepens our understanding of corporate control, and the analysis of residual claimants usefully extends the economics of internal organization to include partnerships, mutuals, nonprofits, and the like. The basic argument is this: specialized governance structures arise in response to the efficiency needs of each type of organization. This is an important argument and one with which I broadly concur. They couple this, however, with a strong suggestion that these structures have reached a high degree of refinement-on which account there is not now, if indeed there ever has been, an organization control problem with which scholars and others are legitimately concerned. On this point I have grave doubts. My discussion of the paper addresses three issues: What is the relation, if any, of the hierarchical organization of the firm to economic performance? What relation, if any, does residual claimant status have to the composition and character of the board of directors? And is there now or has there ever been a corporate control problem? I deal with each of these issues in order.

This Commentary summarizes and remarks on several discussions of the link between academic accounting research and financial reporting standard setting. Our Commentary is prompted by references to building the International Accounting Standards Board's (IASB) research capacity, included in three due process documents: Report of the Trustees' Strategy Review, IFRSs as the Global Standard: Setting a Strategy for the Foundation's Second Decade; Agenda Consultation 2011; and Feedback Statement: Agenda Consultation 2011. Pursuant to its mission, the International Association for Accounting Education and Research (IAAER) has undertaken activities, including hosting two roundtables, related to the link between academic accounting research (and researchers) and the IASB's standard‐setting activities. We discuss the main issues addressed and themes emerging from the IAAER roundtables including whether academic research is relevant to standard setters; types of academic research, and areas of inquiry, that would be most relevant to accounting standard setters; perceptions on why academic research is not more useful to standard setters and challenges to academic researcher's engagement in standard setting. We summarize the IAAER Committee response to the consultation paper, Status of Trustees' Strategy Review. Finally, we identify areas where we believe academia can assist in building a dedicated research capacity at the IASB and note specific areas where future academic research is needed to inform the IASB.

In the academic world, academicians, researchers, and students have already employed Large Language Models (LLMs) such as ChatGPT to complete their various academic and non-academic tasks, including essay writing, different formal and informal speech writing, summarising literature, and generating ideas. However, yet, it is a controversial issue to use ChatGPT in academic research. Recently, its impact on academic research and publication has been scrutinized. The fundamental objective of this study is to highlight the application of ChatGPT in academic research by demonstrating a practical example with some recommendations. Data for this study was gathered using published articles, websites, blogs, and visual and numerical artefacts. We have analyzed, synthesized, and described our gathered data using an "introductory literature review." The findings revealed that for the initial idea generation for academic scientific research, ChatGPT could be an effective tool. However, in the case of literature synthesis, citations, problem statements, research gaps, and data analysis, the researchers might encounter some challenges. Therefore, in these cases, researchers must be cautious about using ChatGPT in academic research. Considering the potential applications and consequences of ChatGPT, it is a must for the academic and scientific community to establish the necessary guidelines for the appropriate use of LLMs, especially ChatGPT, in research and publishing.

The International Accounting Standards Board (IASB) faces a vast number of standard-setting issues at all levels of financial reporting. The purpose of this paper is to explore the relevance of academic research for financial reporting standard setting and the role of academic researchers in the standard-setting process. We contribute to the current debate surrounding International Financial Reporting Standards (IFRS) by drawing inferences from prior findings regarding the role of research in the IASB's standard-setting efforts. After defining three broad categories of standard-setting questions, we explore how the international heterogeneity of its constituency adds constraints to the IASB's work. We then investigate from an epistemological perspective whether and how academic research can inform policy makers. Based on a review of extant literature, we discuss the general criteria which a piece of research should fulfill in order to be perceived as relevant and useful by standard setters. This discussion is followed by more detailed considerations regarding the suitability of different research approaches for each of the three categories of standard-setting questions. We also touch on the subject of inferential problems inherent in most academic accounting research. Since our main objective is to contribute insights relevant to the IASB's efforts, we analyze academics' career systems and their incentives to engage in research intermediation, before discussing possible ways in which interested researchers can channel their insights into the IASB's standardsetting process. Overall, we emphasize the international dimension of IASB standard setting and its implications for relevant research.

The International Accounting Standards Board (IASB) faces a vast number of standard‐setting issues at all levels of financial reporting. The purpose of this article is to explore the relevance of academic research for financial reporting standard setting and the role of academic researchers in the standard‐setting process. We contribute to the current debate surrounding International Financial Reporting Standards (IFRS) by drawing inferences from prior findings regarding the role of research in the IASB's standard‐setting efforts. After defining three broad categories of standard‐setting questions, we explore how the international heterogeneity of its constituency imposes constraints on the IASB's work. Then, whether and how academic research can inform policy makers is investigated from an epistemological perspective. Based on a review of extant literature, the general criteria which a piece of research should fulfil in order to be perceived as relevant and useful by standard setters are discussed. This discussion is followed by more detailed considerations regarding the suitability of different research approaches for each of the three categories of standard‐setting questions. We also touch on the subject of inferential problems inherent in most academic accounting research. Since the main objective is to contribute insights relevant to the IASB's efforts, we analyse academics' career systems and their incentives to engage in research intermediation, before discussing possible ways in which interested researchers can channel their insights into the IASB's standard‐setting process. Overall, the international dimension of IASB standard setting and its implications for relevant research are emphasized.

K rivogorsky and Burton (2012) examine the association between dominant shareholders and firm performance for 1,533 firms from seven Continental European countries using ownership data from 2005 to 2007. The primary analysis in the paper tests the effects of four separate types of dominant owners (institutions, blockholders, banks, and individuals and families) on two measures of accounting performance (return on assets and return on shareholder funds) and a measure of firm value (market-to-book ratio). Supplemental tests examine cross-sectional differences in the effects of each type of dominant owner across individual countries. The main results indicate that banks and individual and family owners have a positive effect on firm performance, while institutions and blockholders have a negative effect on firm performance. The evidence from the within-country tests shows that the relation between particular shareholder types and firm performance varies across different jurisdictions, with dominant owners generally having a positive effect. Dominant shareholders have incentives and the ability to influence the firms in which they own a controlling interest. Dominant owners are motivated to utilize their control to monitor managerial actions because of their claims to the residual profits of the firm (Shleifer and Vishny 1997). Dominant shareholders also have the ability to monitor managerial actions because of their access to inside information and their ability to control internal forces designed to curb managerial actions that are not consistent with maximization of firm value. Thus, monitoring by dominant owners can serve to address the classic agency conflicts between shareholders and investors (Jensen and Meckling 1976), thereby having a positive effect on firm value. In an international context, however, country-level institutions, laws, and other regulatory features can interfere with dominant shareholders’ typical incentives and ability to monitor managerial behavior. Depending on a country’s institutional environment, dominant shareholders could be motivated by a different set of factors, perhaps leading them to take advantage of their ownership status to extract personal benefits from the firm. This type of situation would result in a negative relation between dominant ownership and firm value. Given the potential for either

The science of accounting is continually evolving alongside changes in economic landscapes and development in technology. As a result, accounting academic research must adapt to address these new facts. This paper delves into the most significant areas that are shaping the field, highlighting the exciting possibilities for future research. One major force driving this change is technological growth. Blockchain, with its secure and transparent ledger system, holds immense potential for streamlining financial reporting. Going further, academic research is exploring how this new technology can revolutionize fields such as supply chain management and intellectual property tracking. Moreover, automation is becoming a significant element in changing the method tasks are accomplished. The use of artificial intelligence and robotic process automation is revolutionizing the way accountants handle repetitive tasks. This process allows professionals to concentrate on higher-level analysis and strategic decision-making. Research is being conducted to understand the impact of automation on the accounting workforce and figure out how to develop the necessary skill sets to succeed in this new environment. Going further, the amount of data we have access to is increasing rapidly, and it’s becoming more complex. As a result, accounting research is now more focused on data analytics and visualization tools. These tools help accountants find important insights from financial and non-financial data, which can be used for better decision-making and enhanced forecasting. More deeply, the concept of “agile accounting” is becoming increasingly popular. This method prioritizes adaptability and up-to-date information to offer constant images to firms. Experts are studying how conventional accounting practices can adjust to become more agile and better respond to the changing requirements of modern firms. In addition, the profession of accounting is undergoing a significant change. According to research, there is a shift towards a more advisory role for accountants. This means that accountants are now expected to act as strategic partners to businesses. To fulfil this new role, accountants need to develop new skill sets such as strong communication, data analysis, and problem-solving abilities. Thus, the field of accounting is constantly evolving, and many exciting trends are shaping its future. Researchers in this field will play a crucial role in developing innovative solutions and ensuring that the profession remains relevant and valuable in the years to come. These are just a few of the trends that we can expect to see in accounting research as it continues to evolve. Based on the foundation laid earlier, let’s go deeper into some of the new areas in academic accounting research: Blockchain: Beyond the Hype Blockchain’s potential extends beyond secure transactions. Researchers are exploring its applications in various areas. (A) Auditing: Blockchain-based audit trails can provide a tamper-proof record of financial transactions, increasing audit efficiency and reducing fraud risks. (B) Financial Reporting: Real-time and transparent financial reporting becomes possible with blockchain, enhancing investor confidence and stakeholder decision-making. Automation: Efficiency with a Human Touch While AI and RPA promise significant efficiency gains, research is exploring the human element alongside automation. Key areas of focus include: (A) Impact on Jobs: Studies are analysing how automation will affect the accounting workforce, identifying skillsets needed for future success. This could involve areas like data analysis, critical thinking, and client relationship management. (B) Human-AI Collaboration: Research is exploring how AI can augment human capabilities, freeing accountants for tasks requiring judgment and expertise. This could involve AI handling routine tasks while humans focus on interpreting data and providing strategic insights. Data Analytics: From Numbers to Narratives The explosion of data necessitates new approaches to analysis and interpretation. Accounting research is delving into: (A) Advanced Analytics Techniques: Machine learning and big data analytics are being explored to uncover hidden patterns and predict future trends within financial data. (B) Data Visualization: Research is examining how to effectively communicate complex data insights to stakeholders through clear and compelling visualizations. Agile Accounting: Embracing Change Traditional accounting practices are being re-evaluated through the lens of agility. Research is focusing on: (A) Real-time Reporting: Developing methods for continuous reporting and analysis to provide businesses with up-to-date insights for faster decision-making. (B) Integration with Technology: Research is exploring how to integrate accounting systems with other business functions for a holistic view of operations. The Evolving Accountant: Consultant, not Calculator The accountant of tomorrow is envisioned as a strategic partner, not just a number cruncher. Research is exploring: (A) Developing Advisory Skills: Studies are focusing on how to equip accountants with strong communication, problem-solving, and business acumen to provide valuable strategic advice to clients. (B) The Future of the Profession: Research is examining how accounting education and training can be adapted to prepare future accountants for the evolving demands of the profession.

The separation of ownership from control produces a condition where the interests of owner and of ultimate manager may, and often do, diverge, and where many of the checks which formerly operated to limit the use of power disappear.... In creating these new relationships, the quasi-public corporation may fairly be said to work a revolution. It ... has divided ownership into nominal ownership and the power formerly joined to it. Thereby the corporation has changed the nature of profit-seeking enterprise.1

Citation (2023), "Prelims", Caruana, J., Bisogno, M. and Sicilia, M. (Ed.) Measurement in Public Sector Financial Reporting: Theoretical Basis and Empirical Evidence (Emerald Studies in Public Service Accounting and Accountability), Emerald Publishing Limited, Bingley, pp. i-xxiv. https://doi.org/10.1108/978-1-80117-161-820231012

ABSENT fiat, the form of organization that survives in an activity is the one that delivers the product demanded by customers at the lowest price while covering costs.1 Our goal is to explain the survival of organizations characterized by separation of "ownership" and "control"-a problem that has bothered students of corporations from Adam Smith to Berle and Means and Jensen and Meckling.2 In more precise language, we are concerned with the survival of organizations in which important decision agents do not bear a substantial share of the wealth effects of their decisions. We argue that the separation of decision and risk-bearing functions observed in large corporations is common to other organizations such as large professional partnerships, financial mutuals, and nonprofits. We contend that separation of decision and risk-bearing functions survives in these organizations in part because of the benefits of specialization of

In this paper, I survey empirical research in accounting and finance over the past 15 years (since my prior survey, Ryan 1997) on the relevance of firms’ financial report information for the evaluation of their risk. I assume higher risk-relevance indicates enhanced risk reporting quality. Based on these research findings and assumption, I make four primary recommendations for how financial reporting policymakers can improve risk reporting quality. These recommendations pertain to both summary accounting numbers (which may be recognized bottom-line amounts or analogous amounts calculated from required disclosures) and other financial report disclosures. First, policymakers should require firms to report comprehensive income statements that: (1) measure comprehensive income based on fair value or a similarly information-rich accounting measurement attribute; and (2) present the components of comprehensive income that are primarily driven by variation in cash flows from those that are primarily driven by variation in costs of capital. Such comprehensive income statements would provide users of financial reports with the flexibility to calculate alternative income numbers and thereby to perform different types of risk assessment analyses that research has shown to be useful. This recommendation reflects a central theme of this paper: alternative income numbers play different but fundamental roles in risk assessment. Second, policymakers should attempt to maximize the ties of other financial report disclosures to summary accounting numbers. My primary specific recommendation in this vein is to require firms to conduct and disclose the results of back-tests of prior significant accrual estimates, indicating any identified trends in and drivers of revisions to those estimates, and describing the effects of those revisions on current and if possible future summary accounting numbers. Third, policymakers should encourage and to the extent feasible require firms to aggregate and present risk disclosures in tabular or other well-structured formats that promote the usability of the information. Identifying and propagating the use of existing best disclosure practices and encouraging new best practices is the most natural way to do this. Fourth, for model-dependent risk disclosures, policymakers should encourage and if feasible require firms to disclose the primary historical and forward-looking attributes of the models and their implementation in practice, sensitivity of the model outputs to common variants of those attributes, and benchmarking of the models to standard portfolios of exposures.

Introduction Optimal penalties for corporate fraud require that firms face expected penalties equal to the total social costs of the crime. Yet formal courtimposed sanctions for committing fraud often represent a small fraction of the damage produced by the fraud. Sheer and Ho (1989), for example, estimate that the median and mean ratios of criminal fines to the private loss from private fraud were 0.14 and 0.73 in 1988. The corresponding median and mean ratios for government procurement fraud were 0.29 and 1.60. Including criminal restitution raises the median dollar sanction-to-loss ratio for private fraud to 0.84 and for government procurement fraud to 0.68. These ratios are for private parties convicted of fraud. The ratio of the expected court-imposed penalty to the social cost of the fraud is undoubtedly smaller. Particularly when compared to other crimes such as environmental pollution, where the median ratio of criminal fines to private loss is 3.71, the penalty for fraud seems surprisingly low. The perceived underpunishment of corporate frauds has recently affected public policy. Reflecting popular opinion that existing penalties were too low, the US Sentencing Commission – the federal agency responsible for setting the penalty guidelines used by judges – established corporate sentencing guidelines in 1991 that raised median corporate fraud penalties by over twentyfold. This article criticises the conventional wisdom about corporate fraud in two ways. First, we explain that the typical optimal criminal penalty for private corporate fraud is small because the external effects of such frauds are usually small. An increase in criminal penalties for corporate fraud can do more harm than good because it encourages the substitution of criminal penalties for reputation as a mechanism to police fraudulent behaviour.