Accounting Research Journals Research Articles

Measuring the Prevalence of Earnings Manipulations: A Novel Approach

ABSTRACTWe provide prevalence estimates for five forms of earnings manipulation based on executives’ reports about their firms’ actual reporting practices. After preregistering our methods and analyses via the Journal of Accounting Research’s registration‐based editorial process, we recruit nearly a thousand executives from firms listed in the Russell 3000 Index to participate in either a survey or a list experiment; the hallmark of the latter being additional privacy protections designed to promote honest disclosure about self‐incriminating information. In our survey, 26.8% of executives disclose at least one form of earnings manipulation at their firm in the 2018–2023 period: 18.0% report changing an operational activity to meet a near‐term earnings target at the expense of long‐term value (i.e., real earnings management), 8.8% report intentionally obfuscating unfavorable information, 6.6% report manipulating accruals, 3.9% report withholding material information, and 0.0% report accounting fraud. Our list experiment produces an economically higher result in two cases, estimating that 29.9% of firms engaged in real earnings management and 12.4% committed accounting fraud over the same time period. We conclude that while a traditional survey can provide credible lower‐bound estimates for the prevalence of many forms of earnings manipulation, list experiments encourage more honest disclosure in some cases.

Social Comparison on Multiple Tasks: Sacrificing Overall Performance for Local Excellence?

ABSTRACTThis field experiment investigates how different levels of aggregation in relative performance information (RPI) impact employee performance in environments with multiple tasks. We randomly assign store employees of a retail chain to three groups: RPI on overall performance (control group), RPI on separate tasks, and RPI on both overall performance and separate tasks. We do not find evidence that providing separate task RPI instead of overall RPI affects performance or effort allocation. However, providing RPI on both overall performance and separate tasks seems to reduce performance, especially in the low‐return task. This suggests that detailed RPI directs employees’ attention to the smaller benefits of low‐return tasks. We further find that only 30.5% of the employees accessed their performance reports, highlighting a distinction between providing RPI in the field and the laboratory. This study is based on a registered report accepted by the Journal of Accounting Research.

Does Financial Expertise within the Audit Committee Mitigate Stock Price Crash Risk? Unraveling the Impact of Accounting Proficiency on Market Vulnerability.

Stock price crashes can have severe consequences for investors and the overall financial market. This study investigates whether financial expertise within the audit committee can effectively mitigate stock price crash risk, with a specific focus on the impact of accounting proficiency on market vulnerability. By incorporating a comprehensive empirical analysis and recent scientific references, we aim to shed light on the crucial question of how audit committees' composition influences market stability. Drawing upon recent scientific references, including Smith and Johnson (2023) in the Journal of Accounting and Finance Research, Chen, Wang, and Li (2022) in the Journal of Financial Economics, and Zhang and Lee (2021) in the International Journal of Accounting and Auditing Research, we explore the relationship between financial expertise within audit committees and their ability to act as a safeguard against stock price crashes. Our research methodology involves analyzing data from various financial markets to ascertain the potential effectiveness of audit committees with members possessing higher levels of financial expertise in preventing or mitigating stock price crashes. By integrating insights from these recent scientific articles, we present a comprehensive examination of the influence of accounting proficiency on market vulnerability. The findings of this study will contribute significantly to the existing literature on corporate governance and market stability. Policymakers, investors, and corporate boards will gain valuable insights into the role of financial expertise within the audit committee in managing stock price crash risk and promoting market resilience. Ultimately, these insights can inform decision-making processes and enhance corporate governance practices to foster more stable and sustainable financial markets.

The New Wave of CSR-Related Mainstream Accounting Research: On the Performative Effects of Literature Reviews

ABSTRACT This commentary/reflection offers a critical analysis of four articles presenting literature reviews concerning Corporate Social Responsibility (CSR) research in accounting published in North American-based or inspired accounting research journals and of the research on which they focus. This analysis is presented against the backdrop of [Gond, J.P., S. Mena, and S. Mosonyi. 2023. The performativity of literature reviewing: Constituting the corporate social responsibility literature through re-presentation and intervention. Organizational Research Methods 26, no. 2: 195–228] conceptualisation of the performative effects of literature reviews, examinations of the recent resurgence of CSR research in top-tier North American-based accounting journals offered by well-established social and environmental accounting (SEA) researchers, as well as in light of some of the many reviews on the same or similar lines of research. Whilst previous examinations of such resurgence focused on regular articles, this reflection focuses on literature reviews, which I consider a negative development in view of what they represent in terms of the self-referencing behaviour already present in the literature they review. This commentary serves the purpose of cautioning those interested in becoming acquainted with accounting research on CSR-related topics that the reviews examined should not be used as an entry point, given that they offer a rather incomplete picture of such research. Rather, they should only be used after having acquired a global view of CSR-related literature.

Special Issue Call for Papers for the Accounting and Business Research journal

Special Issue Call for Papers for the Accounting and Business Research journal

How to Improve on the Gray’s Index for Accounting Conservatism

Abstract The Gray’s index has been used to compare accounting variables such as earnings in a sample of financial accounting figures since its introduction by Gray (Gray, S. J. 1980. “The Impact of International Accounting Differences from a Security-Analysis Perspective: Some European Evidence.” Journal of Accounting Research 18 (1): 64–76), in view to indicate the relative degree of accounting conservatism between sets of accounting standards. This note aims to improve on this index especially when variables under investigation can be negative. In the latter case, proportionality between the two variables may be hidden by its application. We suggest therefore some amendments to better show this proportionality and improve on statistical comparison of accounting figures generated by alternative sets of accounting standards.

How Does Carbon Footprint Information Affect Consumer Choice? A Field Experiment

ABSTRACTThis paper reports the results of a field experiment investigating how attributes of carbon footprint information affect consumer choice in a large dining facility. Our hypotheses and research methods were preregistered via the Journal of Accounting Research’s registration‐based editorial process. Manipulating the measurement units and visualizations of carbon footprint information on food labels, we quantify effects on consumers’ food choices. Treated consumers choose less carbon‐intensive dishes, reducing their food‐related carbon footprint by up to 9.2%, depending on the treatment. Effects are strongest for carbon footprint information expressed in monetary units (“environmental costs”) and color‐coded in the familiar traffic‐light scheme. A postexperimental survey shows that these effects obtain although few respondents self‐report concern for the environmental footprint of their meal choices. Our study contributes to the accounting literature by using an information‐processing framework to shed light on the information usage and decision‐making processes of an increasingly important user group of accounting information: consumers.

More on the relationship between interdisciplinary accounting research and citation impact

AbstractUsing multiple indicators of interdisciplinarity (variety, balance, and disparity), this study examines 1613 references cited in articles published between 1976 and 2018 in six highly regarded accounting research journals (Accounting, Auditing and Accountability Journal (AAAJ), Accounting, Organisations and Society (AOS), Management Accounting Research (MAR), Journal of Accounting and Economics (JAE), Journal of Accounting Research (JAR), and The Accounting Review (TAR)). The findings are threefold: the interdisciplinarity of cited references is low compared with the reported findings in the non‐accounting disciplines; there is no discernible change in the level of diversity during the sample period; and the level of citations is negatively related with the dimensions of diversity.

Is analytical tax research alive and kicking? Insights from 2000 until 2022

AbstractThis literature review evaluates the development and impact of analytical tax research (ATR) from 2000 until 2022. Based on 345 research papers, we (1) identify emerging and declining research topics in the area of ATR, (2) examine the trends in publication outlets and author teams, and (3) analyze citation metrics at both the level of articles and authors to measure perception and impact of ATR. First, we find that rather new topics, such as the impact of taxation on entrepreneurship, innovation and R&D, have begun to attract attention. Second, tax journals are not the preferred outlet for ATR and author teams exhibit a decreasing gender imbalance. Third, citation metrics are highly centered on specific publications and individual authors. Moreover, publications that appeared in economics and finance journals generate disproportionately large citation numbers compared to those that were published in tax, accounting and business research journals. Authors from Anglo-American institutions have significantly more citations than researchers from German-speaking countries. We find that ATR does not form a closed community. It unites researchers from different backgrounds based on their— sometimes nonrecurring—thematic interest in the effects of taxation on economic decisions.

Which multiples matter in M &A? An overview

This paper provides an overview of valuation multiples in mergers and acquisitions advisory. I review the literature and legal controversies and the theoretical basis for their role. I then standardize all the advisor multiples available in SDC Platinum along four dimensions and report rich descriptive statistics on each dimension over time and across industries. I highlight eight findings that are notable in light of current knowledge and debates. This paper answers the call from Gow et al. (Journal of Accounting Research 54(2):477–523, 2016) for thorough descriptive research, to provide a foundation and prompts for future hypothesis development. It includes an explicit guide for using this data, an overview of the key institutional details, and a discussion of tractable and open research questions.

2022 Excellence in Refereeing

The Journal of Accounting Research is proud to recognize our top referees of the previous calendar year. The senior editors selected those named below for their “2022 Excellence in Refereeing” based on the quality and the number of reviews they had performed for the journal during the 2022 calendar year. We thank the referees for their invaluable services to the journal. Jannis Bischof, University of Mannheim Matthew Bloomfield, University of Pennsylvania Pietro Bonetti, IESE Business School Thomas Bourveau, Columbia University Mark Bradshaw, Boston College Matthias Breuer, Columbia University Jung Ho Choi, Stanford University Yiwei Dou, New York University Raphael Duguay, Yale University Travis Dyer, Brigham Young University Henry Eyring, Duke University Fabrizio Ferri, University of Miami Henry Friedman, University of California, Los Angeles Stephen Glaeser, University of North Carolina João Granja, University of Chicago Nicholas Guest, Cornell University Steven Kachelmeier, University of Texas, Austin John Kepler, Stanford University Sehwa Kim, Columbia University Ranjani Krishnan, Michigan State University Lian Fen Lee, Boston College Miao Liu, Boston College Yao Lu, Cornell University Daniele Macciocchi, University of Miami Charles McClure, University of Chicago Mihir Mehta, University of Michigan Maximilian Muhn, University of Chicago James Omartian, University of Michigan Gaizka Ormazabal, IESE Business School Hong Qu, Kennesaw State University Thomas Rauter, University of Chicago Delphine Samuels, University of Chicago Timothy Shields, Chapman University Nemit Shroff, MIT Lorien Stice-Lawrence, University of Southern California Stephen Stubben, University of Utah Andrew Sutherland, MIT Sorabh Tomar, Southern Methodist University Rahul Vashishtha, Duke University Felix Vetter, University of Mannheim Dushyantkumar Vyas, University of Toronto Charles Wang, Harvard Business School Clare Wang, University of Colorado, Boulder Edward Watts, Yale University TJ Wong, University of Southern California Gaoqing Zhang, University of Minnesota Frank Zhou, University of Pennsylvania Christina Zhu, University of Pennsylvania Luo Zuo, Cornell University

An Open Letter to the <i>Journal of Accounting Research</i>: Demonstrate that You Are Not Sweeping Misconduct under the Rug

An Open Letter to the <i>Journal of Accounting Research</i>: Demonstrate that You Are Not Sweeping Misconduct under the Rug

Türkiye'de Muhasebe Doktora Tezlerinde Atıf Yapılan Yabancı Dergiler Üzerine Bir İnceleme

This study was prepared with the aim of determining the level of use with references to accounting journals published abroad in order to guide researchers in their publication preference. The data set of the research consists of doctoral theses in the field of accounting between 2010-2020 years in Turkey. The most cited foreign journal list was determined based on the citations of the doctoral theses written between 2010-2020 in the field of accounting to the journals published abroad. As a result of the research, it has been determined that the top three most cited foreign journals are “The Accounting Review”, “Journal of Accounting and Economic” and “Journal of Accounting Research”.

Analysts' knowledge structure and performance

AbstractThis article examines the effect of financial analysts' knowledge structure on their forecast performance based on manually collected data of 1590 sell‐side financial analysts' educational background. The longer the period of higher education in one major, the profounder the knowledge in a specific area (Ng & Feldman, Personnel Psychology, 62, 2009, 89), and the less likely it is grasped by self‐education outside university. Thus, we argue that analysts who study the same (different) major in undergraduate and postgraduate periods have deeper (wider) knowledge and better (poorer) understanding to a major‐related industry (Brown et al., Journal of Accounting Research, 53, 2015, 1). Our results show that financial analysts with deeper knowledge tend to release more accurate earnings forecasts and their earnings revisions evoke larger market reactions. The forecast advantage of analysts with deeper knowledge is more pronounced when firms' business is more concentrated or more relevant to analysts' knowledge. We conclude that the knowledge structure cultivated by higher education can partially explain analysts' job performance and deeper knowledge can bring better industry understanding besides work experience (Bradley et al., The Journal of Finance, 72, 2017, 751).

Global Diversification and the Cost of Equity

The conventional view in the standard finance textbooks is that organizational form does not matter for a firm’s cost of capital because firm diversification reduces only idiosyncratic risk and not systematic risk. In this study, we investigate the effect of global diversification on the ex-ante cost of equity implied by the residual income valuation model (Ohlson, Earnings, book value and dividends in security valuations. Contemporary Accounting Research, 11(2), 661–687, 1995), using a sample of US firms from 1997 to 2019. Employing the empirical approach developed in Easton et al. (Using forecasts of earnings to simultaneously estimate growth and the rate of return on equity investment. Journal of Accounting Research, 40(3), 657–676, 2002), our results suggest that global diversification reduces the cost of equity capital for both single-segment firms and multi-segment firms. Our results highlight the effect of global diversification on the equity risk reduction, which may explain the increasing proliferation of foreign operations among US firms — a trend that neither the cash flow effect nor the capital structure effect proposed in previous studies can explain.

Erratum

Erratum

Understanding How the Effects of Conditional Conservatism Measurement Bias Vary with the Research Context

We re-examine previous seminal studies on conditional conservatism (CC) that apply the asymmetric timeliness (AT) measure of Basu [(1997). The conservatism principle and the asymmetric timeliness of earnings. Journal of Accounting and Economics, 24(1), 3–37. https://doi.org/10.1016/S0165-4101(97)00014-1] and compare the outcomes with those based on the modified AT (MAT) measure of Badia et al. [(2021). Debiasing the measurement of conditional conservatism. Journal of Accounting Research, 59(4), 1221–1259. https://doi.org/10.1111/1475-679X.12366] and the spread in conditional variances (SCV) measure of Dutta and Patatoukas [(2017). Identifying conditional conservatism in financial accounting data: Theory and evidence. The Accounting Review, 92(4), 191–216. https://doi.org/10.2308/accr-51640]. Our conclusions are threefold. First, all three measures yield similar inferences in interrupted time-series settings that examine the change in CC following a policy mandate. Second, the inferences drawn from the AT measure in studies that model the determinants of CC based on cross-sectional settings are more sensitive to test specifications and research designs. Third, across the three measures, MAT shows the best empirical performance in terms of aligning with existing theories while being less affected by AT bias.

The effects of person‐specific, task, and environmental factors on digital transformation and innovation in auditing: A review of the literature

AbstractThis study reviews literature examining digital transformation in the external audit setting. Our review will inform the standard‐setting initiatives of the International Auditing and Assurance Standards Board (IAASB) related to the use of technology in auditing. We identified 36 articles on digital transformation in the external audit published between 2000 and 2021 across 20 journals ranked A*, A, B, and C on the Australian Business Deans Council (ABDC) 2021 Journal Quality List. We also identified 18 advanced working papers. These articles cover conceptual frameworks and archival, experimental, interviews, case studies, and survey research methods. Fifty percent of the published articles appear in A* or A journals, of which nine were published in one of the premier six accounting research journals (i.e., A*) since 2020. This trend is a promising sign that there appears to be increasing interest in publishing digital transformation‐related research in these general interest journals. We use the Bonner judgment and decision‐making framework, coupled with the four primary data analytic tools, to organize and evaluate the literature. This study examines descriptive and diagnostic analytics; more complex techniques, such as predictive and prescriptive, are not as prevalent. Further, existing research insufficiently addresses how data analytic tools impact auditor judgment and decision‐making, providing multiple future inquiry lines.

Mediating Effects of Accounting Conservatism on The Relationship Between Corporate Governance and Cost of Capital

Mediating Effects of Accounting Conservatism on The Relationship Between Corporate Governance and Cost of Capital

Irregularities in 'The Silent Majority' and the Failure (or Absence) of Editorial, Review, and Ethical Procedures at the Journal of Accounting Research

Irregularities in 'The Silent Majority' and the Failure (or Absence) of Editorial, Review, and Ethical Procedures at the Journal of Accounting Research