Accounting Performance Measures Research Articles

The Beville manufacturing case: Using factory-simulation software to teach the concepts of activity-based costing and nonfinancial performance measures

The focus of much recent accounting research has been the changing manufacturing environment facing the management accountant. The evidence suggests that manufacturing technology is changing at a rapid pace; therefore, accounting educators must seek new and innovative ways to help students grasp the complexities of what has been termed the “new manufacturing environment.” Describing the dynamics of an operating factory is a major challenge facing the accounting professor because many (most) students accounting or nonaccounting, graduate or undergraduate have not seen a factory in operation. In the spirit of the “Bedford Report” issued by the American Accounting Association Committee on the Future Structure, Content, and Scope of Accounting Education (1986) and the “Big Eight” white paper (Arthur Andersen & Co. et al., 1989), we use factory-simulation computer software to help students understand the complexities and interrelationships of a production facility.* The focus is on understanding complex relationships and integrating the physical manufacturing phenomena with accounting numbers and performance measures. As the simulation program executes, the students observe units flowing through the factory, scrap occurring, inventory levels rising and falling, downstream workcenters stopping because of lack of input from upstream workcenters, and both random and scheduled maintenance occurring. When the simulation period is complete, the computer package provides summary statistics illustrating throughput levels, scrap rates, utilization percentages, average work-in-process (WIP) levels, and downtime analysis. The

Sources of influence on capital expenditure decisions: a contextual study of accounting performance measurement

This paper reports the results of a series of case studies of capital expenditure decision processes in divisionalized firms. The case studies were designed to explore the elements of broadly defined control systems operating on divisional management participants in these decisions. Twenty-one interviews were conducted with central and divisional management. The findings provide an insight into the incidence of ‘functional’ capital expenditure decisions, and the contextual influences on divisional management. In particular they illustrate the role of managerial service histories, corporate familiarity with divisional operations, strategic planning and multiple performance measures within the organizational control system.

Association between accounting performance measures and stock prices: A test of the life cycle hypothesis

This paper posits that stock market response to two accounting performance measures - sales growth and capital investment - is a function of firm life cycle stage. Firms are grouped into various life cycle portfolios using dividend payout, sales growth, and age. As predicted, the empirical results indicate a monotonic decline in the response coefficients of unexpected sales growth and unexpected capital investment from the growth to the stagnant stages. Additional analysis suggests that this relation is not driven by a firm size effect, risk differences, or measurement error in the proxies for performance measures.

Headquarter Reliance on Accounting Performance Measures in a Multinational Context

AbstractHeadquarter (HQ) reliance on accounting performance measures (APMs) is studied in a European multinational organization. European MNCs typically manage their foreign operations as a portfolio of relatively independent national businesses (Bartlett and Goshal, 1989). In line with previous work on APMs in a limited country setting (Govindarajan, 1984; Brownell, 1987), the HQ relies less on APMs in monitoring domestic units that face environmental instability. However, in the case of geographically dispersed foreign subsidiaries, the HQ emphasizes APMs more when dynamism increases. The financial control pattern towards foreign subsidiaries is similar to Egelhof s (1988) findings in a broad sample of MNCs. This contrasting result is consistent with the greater cost and difficulty of using information‐intensive alternatives to APMs for units that are geographically and culturally distant from the HQ. There is no indication that tight APM‐based management would have a negative impact on work conditions of managers facing instability, but foreign managers find it more difficult to accept the evaluative framework if high reliance is placed on APMs when their environment is dynamic.

Managerial competition, information costs, and corporate governance: The use of accounting performance measures in proxy contests

This paper reports evidence that dissident stockholders who wage a proxy contest for board seats typically site poor earnings rather than poor stock price performance as necessitating the proposed hostile management change. Consistent with this finding, sample firms' pre-contest accounting returns are systematically below-market, whereas their pre-contest stock returns are not. During an election campaign, incumbent managers apparently exercise their accounting discretion to paint a favorable picture of their own performance to voting stockholders. If elected, dissidents tend to take an immediate earnings ‘bath’ which they typically blame on the poor decisions of prior management.

Reliance on Accounting Information, Budgetary Participation, and Task Uncertainty: Tests of a Three-Way Interaction

A series of studies reported in this Journal has addressed the question of whether evaluative styles of managers, which vary in terms of their reliance on accounting-based performance assessments, have systematically different behavioral consequences. These studies have produced conflicting results. In particular, Otley [1978] failed to confirm Hopwood's [1972] earlier findings that evaluative styles dominated by a heavy reliance on accounting performance measures, or a high budget-emphasis (BE), had adverse effects on job-related tension (JRT) and managerial performance. In two independent attempts to reconcile this conflict, Brownell [1982] found that a high (low) BE had positive effects on performance so long as budget participation is also high (low), and Hirst [1983] found that a high (low) BE is associated with low JRT in situations of low (high) task uncertainty. In this paper we report the results of a study which links the Brownell and Hirst attempts to reconcile the above conflict. More specifically, our objective was to assess the extent to which Brownell's finding also depends on the level of task uncertainty, the primary independent variable in the Hirst study. Arguments are presented which predict that

Influence of Reliance on Accounting Performance Measures and Job Structure on Role Ambiguity for Production and Non-Production Jobs

This study examines the relationship between managers' reliance on accounting based performance measures and their perceptions of role ambiguity. The sensitivity of this relationship to both job function (i.e. production versus non-production) and job structure is explored. The strong relationship previously found for production jobs does not generalise to non-production jobs, for which there is only a weak relationship between reliance on accounting performance measures and role ambiguity. In addition, this weak general relationship is not independent of job structure.

The Controllability of Financial Outcomes

Accounting performance measures that capture results not controlled by the person being evaluated may be dysfunctional. The aim of this paper is to provide a framework for identifying situations in which outcomes are captured by such measures as are more (less) likely to be controllable. Results of a questionnaire survey support the claim that as task uncertainty increases, individuals perceive less control over financial outcomes.

Reliance on Accounting Performance Measures, Task Uncertainty, and Dysfunctional Behavior: Some Extensions

Available evidence indicates that the incidence of dysfunctional behavior' undertaken by subordinates is affected by their perceptions of the way in which their superiors use accounting performance measures (APM) to evaluate their performance. However, research to date has produced conflicting results. For example, Hopwood [1972] found that the incidence of dysfunctional behavior was minimal for subordinates who perceived that their superiors used a medium reliance on APM.2 But Otley [1978], in attempting to replicate and extend Hopwood's work, could not confirm some of these results. For example, he found that some

An Empirical Investigation of the Relationship between an AID Hospital Classification Model and Accounting Measures of Performance

An Empirical Investigation of the Relationship between an AID Hospital Classification Model and Accounting Measures of Performance