Management Assumptions Research Articles

Early Evidence on Critical Audit Matters regarding Environmental, Social, and Governance Sustainability: Trends in ESG Reporting

ABSTRACT This study investigates the contents and trends of critical audit matters (CAMs) as they relate to ESG matters (ECAMs). Our examination of the description of ESG matters in ECAMs suggests that the majority of ECAMs fall under measurement issues from environmental liabilities and loss contingencies. To address ECAMs, auditing procedures must assess managerial assumptions by making frequent use of an environmental specialist. Our descriptive analysis suggests that firms that receive ECAMs are more profitable, more likely to have a Big 4 auditor, and have higher litigation risk. Our cross-country comparison suggests a similar trend between ECAMs and their equivalent reports in Europe, as both focus mainly on environmental matters rather than social or governance matters. Overall, our analysis suggests that the issuance of ECAMs represents an important source for discerning a portion of firms’ ESG standings. Data Availability: Data are available from the public sources cited in the text. JEL Classifications: M4.

Unveiling hidden patterns between managerial assumptions, international market orientation, and performance: an unexplored journey into Japanese SMEs

PurposeThis study seeks to investigate how managerial assumptions shape international market orientation (IMO) and how IMO, in turn, affects the performance of small and medium-sized enterprises (SMEs), drawing from cognitive theory and the resource-based view (RBV) to provide the theoretical framework.Design/methodology/approachThe study focuses on the relatively unexplored domain of small and medium-sized enterprises (SMEs) in Japan. A survey was developed and tested using data from 303 Japanese SMEs. The study model was subsequently analyzed using the partial least squares (PLS) technique.FindingsThe study reveals a nuanced relationship between managerial frames of reference (FoRs) and IMOs. The results confirmed notable congruence between interfunctional market orientation and managers who exhibit a political FoR. They also revealed a positive correlation between professional FoR managers and customer market orientation. Additionally, the findings showed that entrepreneurial FoR managers displayed a significant association with competitive market orientation and Bureaucratic FoR matched with the three types of IMO. Finally, the results indicate that all three forms of IMO have a substantial impact on performance, albeit to varying degrees.Research limitations/implicationsThe applicability of our results to multinational corporations (MNCs) has not been evaluated. Since the primary focus was to identify the types of associations among FoR and IMO, the causal pathways and explanatory factors that underpinned these observed relationships were not examined in this study. Additionally, due to the geographical concentration of our sample in Japan, we were unable to conduct tests on the suggested model in other countries to validate and potentially generalize the research findings.Practical implicationsBy developing an implicit understanding of the market orientation fit within the organization’s FoR, managers can enhance their understanding of competitors' activities and enable them to respond with greater efficiency.Originality/valueTo the authors’ knowledge, this is one of the rare papers that inspect the relationship between International market orientations and managerial assumptions as well as their effect on performance.

It’s Just Not Sexy: How Managerial Assumptions Adversely Affect Corporate Sustainability Engagement and Sustainable Technology Adoption

The negative effects of the global climate disruption are becoming increasingly severe, and they are putting pressure on companies to behave in a more environmentally friendly manner. Although some have started to (ecologically) innovate and acquire sustainable resources and capabilities, some seem to be only reluctantly adopting sustainability. In this paper, we report on two consecutive qualitative studies in which we investigated this divergence. In the first—which involved 25 interviewed sustainability managers from a diverse set of German companies—we found that: (i) sustainability was perceived as unattractive and not innovative; (ii) the benefits of sustainable technologies only seemed to be beneficial in the long term, and in non-traditional dimensions; (iii) Green IT/IS usage often only focuses on end-of-the-pipe measures. In the second study, we discussed these findings with four representatives from two very large German companies, and we concluded that—to become sustainable and make meaningful use of sustainable (IT/IS) technologies—they require external incentives from core interest groups, such as legislators and investors. This study contributes to the current body of knowledge regarding corporate environmental responsibility, and it may be of assistance to practitioners, as it highlights the drivers and potential hindrances of sustainable innovation adoption.

Exploring alignment of assumptions in plural leadership: A case study of managers’ implicit leadership theories in the danish public sector

Several researchers have observed that growing attention has been given to the concept of plural leadership in the past couple of decades. However, the role of the manager is largely overlooked in the plural leadership literature. In this study, I draw on the concept of implicit leadership theories to explore how managers’ assumptions about leadership might influence organisations’ ability to realise plural leadership. Based on participant observation and interview data, I identify three basic managerial assumptions about leadership that align poorly with the principles of plural leadership: (1) management positions entail ultimate accountability, (2) disagreement is definitively bad, and (3) resistance is exclusively caused by faulty processes. I argue that these assumptions constitute an obstacle to the practical realisation of plural leadership and consequently that interventions targeting managers’ implicit leadership theories might be effective in developing plural leadership beyond rhetorical changes.

Orchestrating frugal eco-innovation: the plethora of challenges and diagnostics in lean startups of emerging economies

Purpose Sustainable development research assumes that startups, under extreme financial constraints, cannot sacrifice resources now for benefits later without risking their survival. Furthermore, their non-compliance with environmental regulations adds fuel to the fire. This paper aims to explore the challenges faced by startups in resource-scarce economies and the innovative ways of coping with these challenges. Design/methodology/approach The data for the study was collected through 17 semi-structured interviews taken from startup owners and industry experts based in Pakistan and Bangladesh. The transcribed data were coded through NVivo 12 and themes were generated by merging 47 open and 14 axial codes. Findings The findings show that a lack of government support and lack of organisational readiness and motivation significantly affect startups’ frugal eco-innovation. Empirical evidence reveals problems related to the business ecosystem, and internal organisational issues also contribute to challenges faced by startups in attaining a competitive position in the industry. Research limitations/implications The study’s findings suggested leveraging dynamic capabilities can help lean startups in frugal eco-innovation. Furthermore, organisational cohesion, business ecosystem, government regulations and assistantship, organisational mismanagement and market realisation are decisive in startups’ competitive position in emerging economies. Practical implications The findings of the study will result in a higher adoption rate of more competitive business models, and hence, startups’ sustainability. The results would be an effective and efficient deployment of sustainable technological solutions, creating more customer and shareholder value leading to economic growth. Originality/value This research offers a comprehensive analysis of frugal eco-innovative startups by exploring the interplay between different challenges and organisational capabilities. Furthermore, the study contributes to the existing body of knowledge by providing empirical evidence that eco-innovation can be conducted in a resource-constrained environment. This study challenged the scholarly and managerial assumption of the availability of finances as a significant player in eco-innovation. The study also links the Darwin theory of startups to a competitive edge over rivals for startups’ survival.

Improving Auditors' Consideration of Evidence Contradicting Management's Estimate Assumptions

ABSTRACTAuditors have difficulty evaluating the assumptions underlying management's estimates. One source of these problems is that auditors appear to dismiss evidence contradicting management's assumptions because their initial preference to support management's accounting biases their preliminary conclusions and, thus, their interpretation of evidence. We experimentally examine whether auditors with a balanced focus (i.e., a focus on documenting evidence that supports and contradicts their preliminary conclusion) are less likely to dismiss evidence that contradicts management's assumptions than auditors with a supporting focus (i.e., a focus on documenting evidence that supports their preliminary conclusion). We expect and find that, compared with auditors with a supporting focus, auditors with a balanced focus create documentation that is less dismissive of evidence contradicting management's estimate. Importantly, a balanced focus changes auditors' cognition and affects how auditors interpret contradicting evidence rather than merely increasing their documentation of this evidence. The effects of reduced dismissiveness persist to improve auditors' evaluations of a biased estimate and subsequent actions, improving audit quality in an important and difficult area.

Status consumption: Does it matter for Brazilian young adults?

The changes in consumption behavior of Brazilians are the scope of many studies in the last years. However, some common managerial assumptions, as an example, that Brazilian young adults used to have status consumption, do not have enough empirical studies to explain or support these generalizations. Therefore, this study is designed to investigate the Brazilian young adults’ status consumption behavior. So, we outlined a multimethod research, through a survey with 548 Brazilian young adults and a confirmatory focus group with eight young adults. The results show that: (1) Brazilian young adults do not like to be recognize as status consumers, even though they are; (2) The consumption-oriented to gain status is not related to goods, but to experiences; and, (3) The motivations driving young adults to have status consumption in Brazil are high social recognition function and, consumption driven by a tangible component (quality) and an intangible component (brand).

“We’re not uber:” control, autonomy, and entrepreneurship in the gig economy

PurposeUnlike the effect of management styles on employee attitudes, little is known about the effect of managerial assumptions on workers within the gig economy. The purpose of this paper is to utilize McGregor’s Theory X and Theory Y as a framework to discuss two gig economy platforms and how their differing management assumptions affect worker perceptions of themselves as entrepreneurs.Design/methodology/approachThe author utilized qualitative interviews and demographic surveys with 41 contract workers from TaskRabbit, a personal assistant platform, and Kitchensurfing, a “rent-a-chef” service, to examine the impact of differing management assumptions on independent contractor perceptions of themselves as entrepreneurs.FindingsThe Theory X management assumptions and correlated behaviors directly contradict the entrepreneurial ethos marketed by the platforms, resulting in a psychological contract violation for workers and negative responses to the platform. In comparison, Theory Y managerial assumptions and correlated behaviors can be utilized to encourage worker innovation, creativity and sense of self as an entrepreneur.Practical implicationsAs the gig economy continues to grow, algorithms are likely to take on increased importance as a management tool. Although some have suggested that such algorithms may reduce the impact of a capricious manager, the fact remains that algorithms are created by management. If the gig economy intends to encourage entrepreneurship, additional attention must be paid to how differing management assumptions, and their resulting behaviors and algorithms, affect worker attitudes and experience.Originality/valueThis study represents one of the initial academic investigations into how the Theory X and Theory Y management assumptions and correlated perspectives may be applied to independent contractors within the gig economy. Additionally, this study is among the first to examine how gig worker attitudes toward platform firms, and views of themselves as entrepreneurs, are affected by algorithm-implemented management policies.

Auditing Goodwill in the Post‐Amortization Era: Challenges for Auditors

ABSTRACTThe elimination of goodwill amortization in 2001 brought about significant change in how companies are required to account for goodwill. This change in accounting also brought with it new challenges for auditors, namely evaluating the reasonableness of management's assumptions related to goodwill valuation. In addition to introducing technical challenges, this task is particularly difficult given the misalignment in incentives it creates between managers who likely prefer to avoid recording an impairment and auditors who seek to minimize the bias in management's impairment testing. This study focuses on the consequences of the misaligned incentives that auditors face under the current goodwill assessment process. We find that the decision to record a goodwill impairment is associated with an increase in the probability of auditor dismissal. Consistent with the presence of significant friction with clients, our results also indicate that the likelihood of auditor dismissals is negatively related to the favorability of the impairment decision. Furthermore, we find that companies impairing goodwill prior to dismissing auditors subsequently employ auditors that are, on average, more favorable to clients in their impairment decisions.

Deploying partial least squares to investigate the influence of managerial assumptions on corporate social responsibility in the hotel industry

研究目的本论文旨在研究管理假设和企业社会责任的关系并且决定其如何影响企业绩效。研究设计/方法/途径本论文采用问卷采样形式, 位于卡塔尔和阿联酋地区的210家酒店为问卷样本。本论文采用偏最小二乘回归（PLS）来分析数据。研究结果如果企业拥有创业者精神、政治、及专业的参考架构（FoR）, 那么往往会参与到体制性企业社会责任（CSR）的实践。此外, 创业者精神的和专业的FoR促进体制性CSR-组织绩效的关系。研究实践意义本论文结果帮助经理人判定FoR对于CSR实践的影响, 因而提高了CSR政策的效果和效率。由于本研究是探索性论文, 一些所带来的限制已经在文中提到并强调。研究原创性/价值据作者所知, 本论文是仅有的几篇论文中, 研究管理假设和体制性CSR的关系并且确立其对于企业绩效的作用。关键词管理假设，参考架构，体制性CSR，新兴市场，企业绩效，偏最小二乘回归纸张类型研究论文

Auditing Complex Estimates: How Do Construal Level and Evidence Formatting Impact Auditors' Consideration of Inconsistent Evidence?

ABSTRACTThe Public Company Accounting Oversight Board is concerned about auditors' tendency to ignore relevant information that is inconsistent with management's assumptions underlying complex estimates. We find that priming auditors to consider how management arrived at a particular assumption helps curb aggressive reporting by encouraging auditors to engage in low‐level, concrete thinking regarding the direct evidence underlying the assumption. Low‐level, concrete thinking enhances auditors' sensitivity to relevant contradictory evidence. We also find that auditors reviewing graphical (versus textual) evidence are more skeptical of aggressive assumptions underlying a complex estimate. Evidence suggests that this is because graphs provide a better cognitive fit for tasks requiring comparisons and associations among data points. Our study is important to practitioners, regulators, and researchers as it sheds light on how a simple prime and the presentation format of audit evidence influence auditors' professional skepticism in this area. Additionally, it supports audit firms' initiatives to transform data to more visual formats by highlighting a context in which graphs improve auditors' judgments. Finally, we provide evidence as to how different primes affect auditors' evaluation of evidence, which can be useful in designing more effective audit plans.

패션소매점포 매장 인테리어 색상의 친환경 점포 이미지에 미치는 영향 및 소비자 환경인식 조절 효과 연구

Consumer interest in eco-friendly fashion products has been consistent. While most relevant research emphasizes individual morals and environmental concern as the most crucial determinants to eco-friendly consumption behavior, more recent studies point out that in so doing there has been somewhat a neglectance on the importance of fundamental marketing strategies. More specifically, the crucial role of interior colors in fashion retail stores has been managerially considered something certain yet no empirical results have been found to support such a strong managerial assumption. For instance, colors such as green, blue, and brown are believed to represent natural images and are more appropriate to the eco-friendly marketing and the relevant research has been lacking. Therefore, this study attempts to explore the effect of in-store interior design colors (green versus non-green) on consumer perception of green store images. A total of 382 respondents were gathered for an online survey using differing store images as the stimulus and used for testing hypotheses. In the results, respondents exposed to store images using green interior colors reported a higher evaluation of green store image of the store. The effect is found to be significantly moderated by respondent’s environmental concern: to explain, respondents of high environmental concern are less influenced by green color interiors when they evaluate the brand’s eco-friendly image. In sum, the positive influence of green interior colors on green store image is found statistically significant, with its stronger effect for consumers of low concern. Managerial and academic discussions are provided.

Do different marketing practices pre-suppose different frames of reference? An exploratory study

PurposeThe role of managerial assumptions in the formulation of organizational strategies has been well recognized by previous studies, yet in marketing literature, the effect of such imperative on marketing practice choice tends to be ignored. Therefore, this paper aims to empirically investigate how management assumptions fit with the choice of marketing practices, and how such fit affects performance.Design/methodology/approachA model is developed and tested using survey methodology, and the data are analyzed using the partial least square (PLS) approach.FindingsThe results show that different marketing practices were coupled with different frames of reference, resulting in viable matching profiles.Research limitations/implicationsGiven the novelty of the approach adopted in this study, conclusions about association and not causation are drawn. In addition, the study is restricted to Qatar which may reduce the generalizability of its findings and conclusions.Practical implicationsThe findings will help managers to examine carefully the internal logic of their marketing-related profiling, where coherent variables will enhance performance.Originality/valueTo one’s knowledge, this paper reports a work in an area not previously researched. In addition, this study is one of the rare papers that examines unobserved heterogeneity using the PLS-structural equation modeling (SEM) in the field of marketing.

A configuration of managerial assumptions and strategy: towards a synthesis

This paper investigates how management perception and business strategy fits with the choice of the marketing practice. The study employs a configuration approach from data that were collected using three case studies in Palestine, and analysed using informed coding method. The results showed that the three imperatives are inter-related, and internally coherent, resulting in viable configurational profiles. The research is unique and exploratory, and would help managers to carefully examine the internal logic of their marketing-related profiling, it can be used as an assessment tool of their marketing practices in relation to their frame of reference and business strategy, and performance should be enhanced if the three variables are coherent.

A configuration of managerial assumptions and strategy: toward a synthesis

This paper investigates how management perception and business strategy fits with the choice of the marketing practice. The study employs a configuration approach from data that were collected using three case studies in Palestine, and analysed using informed coding method. The results showed that the three imperatives are inter-related, and internally coherent, resulting in viable configurational profiles. The research is unique and exploratory, and would help managers to carefully examine the internal logic of their marketing-related profiling, it can be used as an assessment tool of their marketing practices in relation to their frame of reference and business strategy, and performance should be enhanced if the three variables are coherent.

The Development of Managerial Assumptions about Human Nature in China: A Tale from Quanzhou

The Development of Managerial Assumptions about Human Nature in China: A Tale from Quanzhou

Budgeting Audit Time: Effects of Audit Step Frame and Verifiability

ABSTRACTAuditors must ensure that their audit plans budget sufficient time for key audit steps. Research has shown that insufficient audit time budgets can be detrimental to audit quality. We examine whether framing audit steps negatively (e.g., assess whether management's assumptions are not appropriate) increases time budgets—particularly for steps in which the auditor perceives that performance quality is less verifiable, and thus most at risk of being performed with low quality. First, we report the results of analyses indicating that, in practice, audit steps are predominantly framed positively, potentially resulting in smaller time budgets. We then report the results of an experiment in which 50 experienced audit managers budget time for an audit program that tests a Level-3 fair-value estimate. Prior research and Public Company Accounting Oversight Board (PCAOB) inspections indicate that this is a challenging audit area, vulnerable to allegations of low audit quality. The results support our predictions and suggest that reframing audit steps negatively would increase audit time budgets—an audit quality indicator—particularly for less-verifiable steps.

Leaders’ managerial assumptions and transformational leadership: the moderating role of gender

PurposeAlthough McGregor’s Theory X and Y holds significant attention in literature, research on the managerial assumptions and leadership is very scarce. The purpose of this paper is to examine the influence of a leader’s Theory X and Y managerial assumptions on follower perceptions of transformational leadership behaviors and the moderating role of the leader’s gender in this relationship.Design/methodology/approachA total of 108 leaders provided ratings of their Theory X and Y managerial assumptions; 398 followers then rated their leaders’ transformational leadership behavior. To test the hypotheses, moderated hierarchical regression analysis was conducted.FindingsThe results indicated that a leader’s Theory Y managerial assumptions are positively related to the followers’ ratings of transformational leadership behavior while a leader’s Theory X managerial assumptions are negatively related to the ratings of transformational leadership behavior. Furthermore, the relationship between Theory Y managerial assumptions and ratings of transformational leadership behavior are stronger for female leaders than male leaders.Originality/valueThis study provides important insights for leadership literature by depicting how cognitive mental schemas (i.e. Theory X and Y assumptions) and gender influence their transformational leadership behaviors.

What does the ‘inner world’ of Chinese managers tell us about their management values, thoughts and practices? An ethnographic study

This article aims to investigate an important implicit expectation held by many observers: the dramatic economic change presently occurring on mainland China would be accompanied by the transformation of Chinese managerial values, thoughts and practices. Using an ‘ethnographic’ approach, we seek to understand the forces that are currently shaping Chinese managerial values, thoughts and behaviours in some privately owned firms. A set of ten managerial assumptions at three levels – ‘self’, ‘managing’ and ‘organisation’ – are unveiled and we see how they function coherently in animating managerial behaviour with distinctive ‘Chinese characteristics’. The importance attached to ‘family’ when dealing with employees, the requirement to be as ‘flexible’ as possible in managerial behaviour and the compulsion to call for ‘harmony and stability’ indicate that our informants define good management in a unique way. Interestingly, after years of intense political, ideological campaigning, economic reforms and opening-up policies, a set of traditional Chinese values continues to shape their managerial behaviour.

Rethinking gossip and scandal in healthcare organizations.

Purpose The purpose of this paper is to argue that gossip is a neglected aspect of organizational communication and knowledge, and an under-used management resource. Design/methodology/approach The paper challenges mainstream managerial assumptions that gossip is trivial or tainted talk which should be discouraged in the workplace. Instead, gossip is re-framed at an organizational level of analysis, which provides the opportunity for relational knowledge about systemic failure and poor practice in healthcare to surface. Findings Rather than simply viewing gossip as an individual behaviour and interpersonal process, it is claimed that organizational gossip is also a valuable early warning indicator of risk and failure in healthcare systems. There is potentially significant value in re-framing gossip as an aspect of organizational communication and knowledge. If attended to (rather than neglected or silenced) gossip can provide fresh insights into professional practice, decision making and relational leadership. Originality/value This paper offers a provocative challenge to mainstream health organization and management thinking about gossip in the workplace. It offers new ways of thinking to promote patient safety, and prevent the scandals that have plagued healthcare organizations in recent years.