Effect Of Managerial Discretion Research Articles

Goodwill reporting in corporate acquisitions: The effects of managerial discretion under the new accounting rules

Goodwill is a critical issue in the accounting of corporate restructuring activities in terms of both purchase price allocation in corporate acquisitions and the subsequent write-downs. Although the Financial Accounting Standards Board (FASB) and International Accounting Standards Board (IASB) new accounting standards provide a reference point for goodwill recognition, the complexity of fair value adjustments and the extensive subjectivity involved in assessing goodwill still make its allocation and the impairment-only approach limitedly transparent. Therefore, this study explores the impact of IFRS 3 (International Financial Reporting Standard 3) on management discretion in goodwill reporting. From a methodological standpoint, the hypotheses are tested on a sample of 68 acquisitions executed by Italian-listed acquirers in the 2012–2020 period. Our results confirm the potential for managerial opportunistic behavior in light of the signaling role of goodwill for investors.

경영자의 재량권이 조세회피에 미치는 영향에 관한 연구

경영자의 재량권이 조세회피에 미치는 영향에 관한 연구

최고경영자의 해외경험과 기업 국제화: 경영자 재량권의 조절효과

본 연구의 목적은 최고경영자의 해외경험과 국제화간의 관계를 살펴보고, 두 변수간의 관계가 최고경영자의 재량권에 의해 어떻게 달라지는가를 규명하는 데 있다. 본 연구는 최고경영자의 해외경험과 국제화는 정의 관계를 갖는다고 주장한다. 그러나 이 관계는 경영자의 재량권에 영향을 주는 환경적, 조직적, 개인적 요인에 따라 달라질 것이라고 예측하였다. 2002년부터 2012년까지의 KOSPI 200 기업내 제조업에 속한 101개 기업의 1101개 관측치를 분석한 결과, 최고경영자의 해외경험과 국제화간에는 유의한 정의 관계가 나타났다. 이러한 최고경영자의 해외경험과 국제화간의 관계는 환경적 요인으로 고려한 글로벌 경제위기 시기에는 약화되는 것으로 나타났다. 조직적 요인으로 고려한 기업성과와 관련하여서는 성과가 좋을수록 두 변수간의 관계가 강화되었고, 마지막으로 개인적 요인으로 고려한 최고경영자의 재임기간이 늘어날수록 두 변수간의 관계는 강화되는 것으로 나타났다. 본 연구의 결과는 기업이 국제화 수준을 높이고자 한다면 최고경영자의 해외경험을 고려하는 것도 중요하지만, 최고 경영자가 자신의 해외경험을 더 잘 활용하여 국제화를 추진할 수 있도록 경영자의 재량권을 확보해 주는 것이 중요함을 시사한다.

Managerial Discretion and Strategic Change

Prior research has associated low managerial discretion with a low organizational capacity for adaptation. The role of organizational members outside the top management team (TMT) in influencing organizational outcomes has, however, been overlooked in research on the effects of managerial discretion. Based on a case study of a technology company, I show that the TMT might relinquish a significant part of its discretionary power to employees outside upper management to enable them to contribute to the organization’s adaptive capacity. Specifically, I develop a conceptual model that portrays strategic renewal as an outcome of the interplay between tight and loose coupling or, in other words, a TMT that maintains a system of tightly coupled complementary activity choices and other organizational members that are enabled to initiate organizational adaptations. These results lead me to reassess the managerial discretion construct and to suggest a multi-level conceptualization that considers managerial discretion in the context of the distribution of discretion across the organizational hierarchy.

When Do Founder CEOS Take More Risk than Professional CEOS? The Moderating Effects of Managerial Discretion

To gain a better understanding in how the individual characteristics of CEOs influence firm strategic choice, we explore the relationship between founder CEOs and firm-level strategic risk-taking. We argue that founder-CEO-managed firms will engage in greater risk-taking than professional-CEO-managed firms. Additionally, drawing on the managerial discretion literature, we argue that factors at the individual, organizational, and environmental levels will moderate the relationship between founder status and firm risk taking. Our theoretical premise is that factors that increase managerial discretion — CEO ownership, CEO celebrity, market uncertainty, and market complexity — will positively moderate the relationship between founder-CEO-managed firms and strategic risk-taking. Conversely, factors that decrease managerial discretion — institutional ownership, and firm size — will negatively moderate the relationship between founder-CEO-managed firms and strategic risk-taking. We undertake our investigation within the context of US IPO firms during the 2000-2012 period. Analyses using panel data regressions show that all of our predictions are supported.

The Synthetic Control Method for Comparative Case Studies: An Application Estimating the Effect of Managerial Discretion Under Performance Management

ABSTRACTPublic management researchers are often interested in estimating the effects of aggregate-level management reforms and policy changes, but they frequently rely on observational data that pose a number of threats to internal validity. The synthetic control method for comparative case studies (SCM) has great potential for advancing public management scholarship by addressing some of the methodological challenges associated with observational data and providing intuitive graphical results that help researchers communicate their findings to audiences unfamiliar with quantitative methods. SCM uses a transparent, data-driven algorithm for selecting a weighted combination of control units that act as a plausible counterfactual for estimating causal effects. This article demonstrates SCM by investigating the effect of enhancing managerial discretion under performance accountability systems in the context of public education. The article also provides a number of possible avenues for future public management research using SCM and practical guidance for applying the method.

Managerial Discretion and Task Interdependence in Teams

Prior research suggests that providing managers with discretion over team bonus allocation can improve team performance because it enhances the relation between team members’ contributions to team output and their rewards. This study investigates whether task interdependence influences managers’ ability to enhance this relation and, therefore, alters the effect of managerial discretion over compensation on team performance. Task interdependence reflects the degree to which the increase in team performance resulting from a team member’s effort depends on the efforts and skills of the other team members. Consistent with our predictions, we find that, managers are able to use their discretion over compensation to enhance the relation between team members’ contributions to team output and reward to a greater degree when task interdependence is absent than when task interdependence is present. Also consistent with our predictions, we find that the effect of managerial discretion on team performance depends on task interdependence. Specifically, our results show that managerial discretion over compensation has a positive effect on team performance when task interdependence is absent and negative effect on team performance when task interdependence is present. The results also suggest that predicted effects of task interdependence become more pronounced when task interdependence goes up. Our results have practical implications for firms, which have flexibility in designing their incentive systems in a team environment, because we identify conditions under which the effectiveness of granting managers discretion over team compensation is likely to vary.

The effects of managerial discretion on moral hazard related behaviour: German evidence on agency costs

Based on a sample of German quoted firms in the period 2006–2010 this paper measures the impact of managerial incentives, entrenchment and blockholder monitoring on managerial behaviour typically associated with moral hazard. This is motivated by the observation that while typically the German institutional environment is characterised by the type-II conflict between large and dispersed investors, a number of regulatory and behavioural changes suggest that the issue of managerial leeway and complacency has gained in importance. I find that managerial entrenchment as proxied by excess compensation is associated with higher agency costs, i.e. lower asset turnover and higher discretionary expense ratio and acquisition activity, respectively. In contrast, there is no evidence of an incentive alignment effect of long-term compensation components. Concerning blockholder influence, while general blockholder presence has inconclusive effects, the presence of a blockholder belonging to the traditionally influential group of families, strategic investors and banks is significantly associated with lower agency costs. However, the presence of any other blockholder is associated with higher agency costs stemming from managerial discretion. Overall, this partly conforms to the hypothesis that German corporate governance may be changing in that the problem of managerial complacency and entrenchment has gained in importance; at the same time dominant blockholders still seem to exert influence on corporate policy.

Empirical Research on Effect of Managerial Discretion on CEO Pay: Monitoring Intensity as Moderator Variable

The paper focuses on the special manipulation effect of managerial discretion on CEO pay considering the moderating role of monitoring intensity in China. The paper empirically indicates that the manipulation effect of managerial discretion on CEO pay does exist, and quantitatively describes the degree of the manipulation effect, which shows that the manipulation effect of managerial discretion on CEO pay significantly decreases. The results prove that monitoring intensity can restrain the manipulation effect of managerial discretion on CEO pay. Only under a certain monitoring intensity, will CEO pay not exceed the reasonable level too heavily.

The Adoption of IFRS 3: The Effects of Managerial Discretion and Stock Market Reactions

In recent years, several accounting standards, including IFRS 3, issued by the IASB, substitute historical cost with fair value measures and so provide managers with increased discretion to determine fair value without an actual market for the asset. Using Swedish data, we document the accounting consequences of the adoption of IFRS 3 and the stock market's reaction. After the adoption of this standard in January 2005 the amount of capitalized goodwill increased substantially. Goodwill impairments under IFRS are considerably lower than goodwill amortizations and impairments made under Swedish GAAP. Consequently, the adoption of IFRS 3 increased reported earnings. An analysis of economic incentives influencing the impairment decision at the initial adoption of IFRS 3 shows that tenured management is negatively associated with the impairment decision. However, most firms did not reclassify goodwill or make additional impairments. Firms with substantial amounts of goodwill yielded abnormally high returns despite abnormally low earnings. Investors seem to, correctly or incorrectly, have viewed the accrual-based increase in earnings stemming from IFRS 3 as an indication of higher future cash flows.

Effects of Managerial Discretion in Fair Value Accounting Regulation and Motivational Incentives to “Go Along” with Management on Analysts' Expectations and Judgments

The current study examines the extent to which financial analysts expect firms to manage earnings when accounting rules allow a relatively high degree of discretionary choice and low level of transparency, and measures whether analysts' stock price estimates are upwardly biased when they are aware that management is taking advantage of the situation. We further investigate whether analysts' expectations and judgments in this regard are amplified in the presence of an incentive to “go along” with management's misleading financial information. A total of 44 experienced financial analysts participate in a between-participants experiment, wherein those who are provided with misleading (non-misleading) information from management regarding the fair value of an impaired asset for which there is no active exchange market, expect management to recognize a downwardly biased (non-biased) asset impairment loss and issue commensurately higher (lower) stock price estimates. The results also show that analysts who have an incentive to go along with management anticipate a downwardly biased impairment loss and provide a higher stock price estimate, relative to analysts with no such incentive. Finally, the research findings indicate a significant interaction whereby the differential responses from analysts in the truthful and misleading conditions are greater in the presence, compared to absence, of an incentive go along with management.

The Impact of Pension Assumptions on Firm Value

I examine the association between disclosed financial accounting data and firm value, while incorporating the effect of managerial discretion in reporting those data. I focus on the assumptions used to compute a firm's pension liability. I find that firm values are consistent with analysts being aware of the likely influence of reporting incentives on managers' choices of assumptions. Analysts appear to be aware of the incentives associated with contracting considerations and where they infer that such incentives have induced managers to choose obligation-reducing assumptions, they treat $1 of reported obligation as if it were an obligation of more than $1. These findings suggest that analysts recognize managers' use of assumptions that are not justified by the firm's operating environment and that they discount the effect of those assumptions on the disclosed accounting numbers.

Corporate financial disclosures in the UK, 1920–50: the effects of legislative change and managerial discretion

During the period 1920–50, the legislative approach to corporate financial disclosure in the UK was transformed. Although the changes have been well covered in the literature, the actual levels and patterns of change in UK corporate disclosures, which reflect the effects of both legislative requirements and managerial discretion, have attracted relatively little attention. The main purpose of this paper is to provide a sound empirical basis for conclusions about disclosure practices in the UK across the second quarter of the last century. To that end, the paper provides a structured discussion of changes in corporate disclosures in the UK, based upon detailed analysis of a substantial and broadly based body of corporate data for the years 1920, 1935 and 1950. These dates provide, respectively, a starting point that falls within the coverage of the main existing studies of UK disclosures of the first quarter of the twentieth century, a mid-point that allows for evaluation of the effects of the Companies Acts 1928–9 and the Royal Mail case of 1931 and a closing date that incorporates the effects of the 1948 Act. The relationship between the state and the financial community and its various agencies are clearly of importance, and particular attention has been paid to the effects of managerial discretion on disclosures, given Edwards' view that criticisms aroused by the revelations of the Royal Mail case of 1931, ‘probably had a greater impact on the quality of published data than all the Companies Acts passed up to that date’.