Advancing empirical research in management accounting
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Advancing Empirical Research in Management Accounting. Christopher D. Ittner. Is Empirical Research in Management Accounting Declining?. All Management Accounting Publications in TAR, JAE, JAR, CAR, RAST, JMAR, and AOS 1990-1996 (Shields, JMAR 1997) – mean = 21.71 per year

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Advancing Empirical Research in Management Accounting

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Advancing empirical research in management accounting

Advancing Empirical Research in Management Accounting

Christopher D. Ittner


Is empirical research in management accounting declining

Is Empirical Research in Management Accounting Declining?

  • All Management Accounting Publications in TAR, JAE, JAR, CAR, RAST, JMAR, and AOS

    • 1990-1996 (Shields, JMAR 1997) – mean = 21.71 per year

    • 2002-2004 (excluding review papers) – 48.3 per year

  • All Empirical Management Accounting Publications (Archival, Survey, Field Study)

    • 1990-1996 (Shields, JMAR 1997) – 9.57 per year

    • 2002-2004 – 24.0 per year

    • 2002-2004 (excluding executive compensation studies) – 17.33 per year

Note: Shields (1997) only includes papers by North American authors,

and excludes executive compensation studies


Is empirical research in management accounting declining1

Is Empirical Research in Management Accounting Declining?

  • The number of empirical management accounting papers in The Accounting Review increased from 3 to 17 from 1999-2001 to 2002-2004

  • Other observations

    • Editors of the major journals seem much more inclined to accept management accounting papers

    • Top journals in other fields are accepting related papers (e.g., Management Science, Journal of Marketing, ASQ, AMJ, etc.)

    • The feeling that a field’s research contributions are not being recognized is not unique to management accounting researchers


Moving forward

Moving Forward …

  • The onus is on management accounting researchers to improve the quality and contribution of empirical research

    • Research questions and motivation

    • Methodological issues

    • Data acquisition

    • Conjectures about the future direction of management accounting research


Research questions and motivation

Research Questions and Motivation

  • What makes a good research question?

    • The topic is interesting to the reader

    • The question is motivated by theory, not just changes in practice

    • The answer is not obvious

    • The topic has not been over-examined (e.g., cost driver studies, studies linking non-financial measures to future financial performance) -- unless some argument can be made that the research question, setting, or design is unique and provides new insight


Research questions and motivation1

Research Questions and Motivation

  • Motivating the study is the key to acceptance

    • Why should the reviewer/reader care about this study?

    • What are the specific contributions of this study to the literature?

    • Why is this accounting?

  • Are empirical management accounting research questions just consulting?

    • There is nothing intrinsically wrong with consulting projects providing the basis for research studies (is financial accounting anomalies research any different?)

    • The keys are whether the project addresses an important research question, is objective, and provides a useful method for examining the question of interest


Research questions and motivation2

Research Questions and Motivation

  • Should fads drive management accounting research questions?

    • New practices/fads are useful means for motivating studies, if they can be tied to broader theories of interest to accounting researchers

    • The problem with chasing fads – they tend to close important avenues of research before they have been fully investigated (e.g., ABC)


An example recommended directions for managerial accounting research 1997

An Example-- Recommended Directions for Managerial Accounting Research (1997)

  • Managerial accounting and organizational change

  • Strategic accounting

  • Accounting in horizontal and “learning” organizations

  • Broader organizational and inter-organizational accounting

  • Integrated, causal performance measures and decision support systems

  • Managerial accounting and organizational structure

  • Integrative research

Sources: Shields; Atkinson et al.

JMAR 1997


Research questions and motivation3

Research Questions and Motivation

  • Progress in management accounting will require developing research questions that incorporate multiple theoretical perspectives

    • Economics

    • Psychology

    • Sociology

    • Operations

    • Information technology


An example executive compensation

An Example– Executive Compensation

  • Most empirical studies are based on economic explanations that assume rational/optimal behavior

  • Why is the explanatory power so low for some of the key predictor variables?

  • What is the role of compensation consultants?

  • What alternative explanations exhibit a similar level of explanatory power?

    • Fixed number or constant value of stock options granted each year

    • Managerial power

    • Simple benchmarking to consulting surveys

    • Other “naïve heuristics”


Methodological issues

Methodological Issues

  • Endogeneity

    • Frequent criticism of empirical management accounting research

    • Common to all empirical accounting research

    • Textbook solution is known, but almost impossible to “solve” in real-world applications

  • Recommendations

    • Acknowledge the problem and try to minimize

    • Tests for endogeneity

    • Explanatory power of instruments

    • Better explanation for use of instruments

    • See working papers by Chenhall and Moers; Larcker and Rusticus


Methodological issues1

Methodological Issues

  • Survey research

    • Getting harder to get adequate survey responses (tradeoff between response rate and survey length)

    • Improvements are needed in how management accounting practices are assessed (how would you know a balanced scorecard if you saw one?)

    • Self-reported performance is viewed with skepticism by many reviewers

    • Credibility can be enhanced by using multiple respondents, asking questions with “hard” responses, and linking to other data sources


Methodological issues2

Methodological Issues

  • New statistical tools are available to examine research questions

    • Structural models

    • Non-linearities

    • Complex interactions

    • “Unmixing” techniques

    • Qualitative data analysis

  • Make sure you are applying these methods correctly!


Many integration opportunities exist

Many Integration Opportunities Exist …

Archival/Survey

Primary or secondary data

Economics

Classical statistics

Experimental

Primary data

Psychological or economics

Classical statistics

Qualitative

Primary or secondary data

Various disciplines

Exploratory analysis


Data acquisition

Data Acquisition

  • Potential data sources

    • School and professional contacts

      • What’s in it for them?

    • Faculty members in other departments

    • Internet

      • Many companies will give access to academics for free or for a reduced rate

      • Do the strengths overcome the weaknesses?

    • Disclosure requirements

      • Proxy disclosures (exploit international differences in practices and disclosure requirements)

      • Governmental organizations

      • Regulated industries

  • Don’t be afraid to ask for data!


Conjectures on the future of empirical management accounting research

Conjectures on the Future of Empirical Management Accounting Research

  • It is increasingly difficult (and probably unnecessary) to distinguish between management accounting studies and studies in other accounting fields (financial, audit, tax, systems)

    • Corporate governance and risk assessment

    • Executive compensation

    • Disclosure policy and requirements (nonfinancial information, compensation and governance practices, etc.)

    • Value drivers/value relevance

    • Impact of financial accounting and tax rules on internal practices and decision-making

    • Integrated systems


An example current governance and control practices

An Example-- Current Governance and Control Practices

  • Clearly defined policy framework, policies, and procedures (58%)

  • Harmonized financial and management accounting (55%)

  • Well-defined framework for making and managing decisions (54%)

  • Risk management processes and tools (53%)

  • Harmonized internal and external reporting (52%)

  • Integrated strategic and operational planning (52%)

  • Performance management framework (48%)

  • Good visibility of accounting processes, systems, and controls (40%)

  • Appropriate controls embedded in all processes and supporting technologies (39%)

  • Accelerated reporting and close (39%)

Source: IBM Business Consulting, 2003


Another example information technology

Another Example– Information Technology

  • Top Managerial Accounting Initiatives

    • ERP implementation

    • New reporting software

    • New budgetary procedures

    • Financial consolidation

    • New analytic software

    • Outsourcing back office

  • Uses of Information Technology for Value Creation

    • Exploiting full functionality of ERP (19% today, 68% in three years)

    • Leveraging ERP data for performance management (22% today, 66% in 3 years)

    • Online processing (41% today, 63% in 3 years)

    • Web-based settlement (15% today, 35% in three years)

    • Intelligent scanning (straight to ERP) (10% today, 34% in 3 years)

Sources: Ernst & Young (2003)and IBM (2003)


Conjectures on the future of empirical management accounting research1

Conjectures on the Future of Empirical Management Accounting Research

  • Studies using multiple methods (e.g., quantitative and qualitative; analytical and empirical, etc.)

  • Company-specific field studies that incorporate both data analysis and institutional details/qualitative analysis

  • Topics at the interface of financial and managerial accounting

  • Greater focus on interdisciplinary research

    • Joint research

    • Publishing in non-accounting journals


Advancing empirical research in management accounting1

Advancing Empirical Research in Management Accounting

Christopher D. Ittner


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