16 Management Accounting: Cost Behavior and Other Management Accounting Issues

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    The role of broad scope MAS information in linking organisational market orientation and performance
    ( 2019-08-30) Lestari, Utami ; Winata, Lanita ; Mia, Lokman
    We investigate the mediating role of information provided by management accounting system (hereafter, MAS information) in the relationships between organisations’ market orientation (MO) capability and organisational performance. The data for the study were collected from 131 general managers of medium to large manufacturing organisation in Indonesia. Partial least squares structural equation modelling (PLS-SEM) was used to test the hypotheses. Our literature review reveals that prior research on market orientation and performance ignored the role of MAS information. The results indicate that managerial use of broad scope MAS information partially mediates the relationships between organisation’s market orientation and financial, customer,internal business process and learning and growth-related performance. However, the partial mediation role played by managerial use of the scope MAS information in the relationship between an organisation’s market orientation and customer-related performance is relatively weak. By investigating the role of managerial use of broad scope MAS information in the relationship, this study contributes towards theory development. The results also contribute to practice by facilitating managers’ understanding of how their organisation’s market orientation and managerial use of MAS information can promote the organisation’s performance.
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    The Temporal Effect of Organizational Controls in an Uncertain Environment
    ( 2019-08-30) Horii, Satoshi ; Akroyd, Chris ; Sawabe, Norio
    In this paper we explore the effect of organizational controls in an uncertain environment by focusing on their temporal dimension. We do this by examining a product innovation setting, which is difficult to control due to fast changing customer preferences and competitor actions. We focus on how the timing of two organizational controls – accounting-based budgets and operational-based roadmaps – influence mangers’ actions. We show how these controls creates a space for the knowledge of managers to be made actionable thus influencing the tempo (timing and intensity) of product innovation activities. We carry out this research using a case study of Buffalo, a Japanese firm who is a market leader in the highly competitive computer peripherals market. Case study data was collected at Buffalo over a two-year period and included observations, interviews and company documents. We follow the situated practices of marketing managers who were accountable for the accounting-based budgets and product development managers who were accountable for launching products according to the operational-based roadmaps. At the start of the financial year budgets and roadmaps were linked as managers developed them simultaneously. During the year the budgets and roadmaps became disconnected when product development projects were delayed or when there were changes in the market. This opened up a space for the knowledge of managers to become actionable, thus influencing the tempo (timing and intensity) of product innovation activities. This facilitated organizational control and empowered managers to respond quickly to their highly competitive and uncertain environment.
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    The Information Content of Cost Behavior Components: Evidence from Labor Market Flows
    ( 2019-08-29) Wongsunwai, Wan ; Wang, Lianghui ; Yehuda, Nir
    We examine the information content of cost behavior components in firms’ asymmetric cost function, namely, aggregate-level elasticities of costs with respect to sales increases vs. decreases. We show that the persistence of the elasticity of costs is higher for sales increases than for sales decreases. Using business-level job flows from the Business Employment Dynamics (BED) dataset, which has recently been made available by the BLS, we find that, after accounting for GDP growth and other macroeconomic indicators, the aggregate elasticity of costs with respect to sales increases explains gross job inflows, but not gross job outflows. On the other hand, the aggregate elasticity of costs with respect to sales decreases explains gross job outflows, but not gross job inflows. When we include both elasticities in the regression, both are significant but with opposite signs. We obtain similar results in vector autoregression (VAR) models. Additional tests indicate that: (a) the effect of aggregate elasticity of costs with respect to sales decreases is more pronounced in periods with high uncertainty; and (b) asymmetric cost models explain more of the variation in job outflows than models that assume symmetric cost responses.
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    Disclosure of Investment Information in Multiple Markets
    ( 2019-08-28) Ishinagi, Yoshikazu ; Oh, Joonghwa
    We study the effect of disclosure on firms' investment decisions when a firm competes with an identical competitor in (two) multiple markets and with limited investment resources. We focus on the case where the information disclosure environment may differ by each market. Consistent with previous research in a single Cournot competition, our results show that firms exert more aggressive investments under disclosure than under nondisclosure in symmetric disclosure environments. Our results also show, however, that firms exert less aggressive investments in a disclosure market than in a nondisclosure market if each market has an asymmetric disclosure environment. This stems from the fact that firms must concentrate their limited investment resources on a less competitive market, and multimarket contact allows firms to predict rival firm's competitive behavior.
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    Peer-Level Calibration of Performance Evaluation Ratings: Are There Winners or Losers?
    ( 2019-08-27) Bol, Jasmijn ; de Aguiar, Andson Braga ; Lill, Jeremy
    In this study we examine the common practice of employee performance rating calibration, the process in which calibration committee members discuss, compare, and potentially adjust supervisors’ preliminary subjective employee performance ratings. We highlight the inherent incentive conflict related to calibration between the organization and supervisors, where the organization wants calibration to increase consistency in performance ratings while supervisors are also interested in adjustments that benefit themselves. We show that in peer-level calibration, where supervisors are involved in the calibration of their own employees’ ratings, supervisors strategically use this opportunity to influence the calibration process. Specifically, we show that incentive-driven supervisor rating behavior predicts the winners and losers of the peer-level calibration process. The adjustments (or lack thereof) made during the calibration process are not solely driven by the organizational objective of increased rating consistency, but also by supervisors’ incentives. Our research has important implications for the designers of performance evaluation and compensation plans. It highlights the importance of the structural design and the composition of calibration committees, and cautions against overestimating the accuracy of post-calibration performance ratings when using them for important decisions such as promotions and resource allocation.
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    The ripple effect: How managers’ affective reactions to manager-level controls have a contagious impact on subordinates
    ( 2019-08-26) Bol, Jasmijn ; Haesebrouck, Katlijn ; Loftus, Serena
    We provide evidence on the interrelatedness of management controls at different levels of the organizational hierarchy. Specifically, we investigate whether managers’ affective perceptions (managers’ positive and negative feelings) pertaining to the manager-level management control system impact their subordinates’ control outcomes. We argue that subordinates are influenced by their managers’ affective perception when manager-subordinate contagion is high. Further, we predict that manager-subordinate contagion is negatively related to employees’ independent understanding about the operational-level management control system and negatively related to the organization’s use of culture controls. We test our hypotheses using field data. Results support our predictions. Our study contributes to the MCS literature by highlighting the important role of managers as information conduits within management control systems and illustrate the rippling effect of managers’ reactions to manager-level controls on the effectiveness of operational-level controls.
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    The Dark Side of Manager Narcissism: Evidence on Target Level and Employee Dysfunctional Behavior
    ( 2019-08-21) Shang, Ruidi ; Wang, Alex ; Zu, Yafei
    We examine whether managers’ narcissism affects their decisions about performance targets and the dysfunctional behaviors of their subordinates. Dysfunctional behaviors occur when employees act to increase their performance and payoffs at the expense of their firm’s interests. Although dysfunctional behaviors are common and costly to firms, there is limited evidence of why these behaviors occur. Using a field-based dataset, we find that manager narcissism has both direct and indirect associations with employee dysfunctional behavior. In particular, managers with a higher degree of narcissism tend to set higher performance targets for their subordinates, which in turn lead to more employee behaviors that are dysfunctional. Besides this indirect association, we find manager narcissism also has a direct positive association with employee dysfunctional behavior. Our findings contribute to the management accounting literature and business practices by documenting that narcissism, a personality trait that is ubiquitous among managers, plays an important role in affecting managers’ control choices and the behaviors of lower-level employees.
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    The Effect of Organizational Commitment on Collusive Supervision Over Reporting
    ( 2019-08-07) Cieslewicz, Joshua ; Bailey, Jim ; Helquist, Joel
    We apply the Theory of Planned Behavior framework and find that attitude, subjective norms, and perceived behavioral control (PBC) influence supervisor intentions to involve subordinates in aggressive reporting practices to the supervisor’s advantage. We refer to this behavior as collusive supervision over reporting (CSOR). Using PLS Path Modeling, we find stronger materialism leads to stronger attitudes, subjective norms, and perceived behavioral control (PBC) to engage in CSOR. We find that organizational commitment counters this influence. Stronger organizational commitment is associated with reduced attitudes and subjective norms to engage in CSOR. We also consider the collision of these two variables, materialism and organizational commitment, and explain interaction effects. Our findings suggest that subordinates navigating situations wherein they are pressured to engage in aggressive reporting practices can make petitions to the supervisor’s sense of organizational commitment. Organizational commitment favorably dampens the effect of materialism on attitude towards CSOR. However, the interaction effect of organizational commitment and materialism on subjective norms towards CSOR is more complicated. Through social projection supervisors project their own materialism levels onto their supervisors, and then increasing organizational commitment causes them to want to fit in even more with these supervisors. When materialism is low for a supervisor, increasing organizational commitment results in further dampening the effect of materialism, leading to improved subjective norms and lower intentions to engage in CSOR. When materialism is high, however, increasing organizational commitment amplifies the effect of materialism on subjective norms, leading to increased CSOR.
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    Motivating through Managing by Walking Around
    ( 2019-05-01) Martinez-Jerez, F. Asis ; Casas-Arce, Pablo ; Moran, Joseph
    In this paper, we analyze the motivational effects of managing by walking around (MBWA), a management style that emphasizes managers’ unstructured visits to the rank and file of the company. We do so by conducting a field experiment in the retail division of a medium-sized bank located in Latin America. We find that branches increase their sales productivity by a significant ten percent in the window following the management visit, an effect that persists for at least a month after the event. Contrary to our expectations, we do not find that the incentive effect of the visit is stronger for those branches located further away from the bank’s headquarters.