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Working Papers

Thought leadership at the intersection of accounting practice and accounting policy.

Boundary Work at the Margins of Politics and Auditing : Rationalising Advertising Probity in Ontario

P Andon, C Free, VS Radcliffe, and M Stein, 2020

Does Accounting Measurement Influence Market Efficiency ? A Laboratory Market Perspective

M Sooy, 2020

Using laboratory markets where accounting regimes can be directly compared with equivalent economic parameters, we test whether and how two different accounting measurement bases – historical cost and mark-to-market – influence trader perceptions and asset mispricing. Across three experiments, our results show that traders perceive otherwise equivalent assets differently by regime. In the mark-to-market regime traders perceive stronger links between performance and market price changes, and weaker links between performance and asset fundamentals. We also observe that traders in the mark-to-market regime prefer information about future market prices but traders in the historical cost regime prefer information about future dividends. These perceptions correspond with greater market-level mispricing/bubbles in the mark-to-market regime. Our results suggest that accounting regimes can, on their own, contribute to price bubbles and their subsequent collapse.

Research Paper


How the Prospect of Fault Influences Manager's Compliance

M Sooy , 2020

Cooperate or Compete ? The Impact of Vertical Wage Dispersion on Employee's Behavior in Tournaments

L Guo, K Huo, and T Libby, 2020

In this investigation the effect of vertical wage dispersion, defined as the difference in wages between
superiors and subordinates, on subordinates’ behaviors in competition. We propose that higher
vertical wage dispersion increases subordinates’ desire to reduce the vertical pay gap through
collusion against their superiors in a setting where collusion reduces subordinate effort while
increasing subordinates’ pay.

Summary of Research Insight

The Effect of Sanction Target on Manager's Compliance with Regulations

K Huo, Matt Sooy, 2020

Regulators use sanctions to deter managers of organizations from harmful practices. Regulatory sanctions sometimes target individual violating managers but sometimes target entire violating organizations. We use an economic experiment to study the effect of targeting individuals versus entire organizations on managers' compliance decisions. In our setting, regulations prescribe full compliance (e.g., 'the spirit of the law') but enforce only minimal compliance (e.g., 'the letter of the law').  Following social identity theory and self-concept maintenance theory, we predict and find that managers are more likely to comply minimally and less likely to comply fully with regulations under firm-targeted sanctions than under manager-targeted sanctions. Consistent with self-concept maintenance theory, under firm-targeted sanctions, managers also express lower awareness of moral standards and less concern for investors' welfare. In effect, targeting firms resulted in a redistribution of minimal compliance and full compliance, but does not lead to higher overall compliance.  Surprisingly, non-managers expect firm-targeted sanctions to have the opposite effect, expecting more managers to fully comply with regulations under firm-targeted sanctions than under manager-targeted sanctions. Our research suggests that regulatory regimes targeting firms may inadvertently reduce managers' willingness to comply with "the spirit of the law," leading to lower compliance quality.

Research Paper

When Less is More : The Benefit of Partial Relative Performance Information on Creative Problem-Solving Performance

L Berger, K Huo, 2019

In this study, we examine how variations in relative performance information (RPI) affect creative problem-solving by changing individuals’ ability to understand and remember important task constraints. In two experimental studies, we demonstrate that providing partial RPI (publicizing top performers) may be better than full RPI (publicizing all performers) when a firm wishes to motivate creative problem-solving.

Summary of Research Insights

Governance Tensions in MNCs’ Financial Reporting Quality

T Li., M Magnan, Y Shi, 2019

Summary of Research Insight | Research Paper

The State of Ohio’s Auditors and the Enumeration of Population

Persson M., Radcliffe V., & Stein M. 2018

This paper examines the role of the accounting profession as the State of Ohio began to enumerate and identify people with disabilities as part of an attempt by the eugenics movement to eliminate disabled persons from the population. We show that the financial expertise and structures of the State were relied on for the execution of this mandate, which remained in place for over a century.

Price, Fundamental Value and Profit in a Laboratory Asset Market: Does Marking-to-Market Matter?

N.J. Barradale, B. Goodson, & M. Sooy 2018

In a laboratory market setting free of other ‘feedback mechanisms’ (manager discretion, capital requirements, borrowing, etc), this study investigates the possibility that mark-to-market accounting presentation may, on its own, foster greater mispricing than experienced under historical cost accounting presentation.

Corporate Social Responsibility and CEO Risk-Taking Incentives

Y. Shi - 2018

In this paper, we explore how firms incentivize their CEOs subsequent to undertaking risk-reducing corporate social responsibility (CSR) initiatives. Specifically, we focus on the effect of CSR standing on CEO’s future risk-taking compensation incentives. This study is notably distinct from the executive compensation literature that studies how managerial incentives affect firm outcomes. Employing a large sample of US firms from 1992 to 2010, we find strong empirical evidence that CSR standing is positively related to CEO pay-risk sensitivity, demonstrating that firms whose sustainable initiatives are viewed to be successful are more likely to offer their CEOs greater risk-taking incentives. Further, this association is driven by CSR strengths rather than CSR concerns. Additionally, the positive association is more salient for institutional CSR categories rather than technical ones. Our evidence indicates that firms are not passive in response to changes in CSR status.

Auditing and the Development of the Modern State

Radcliffe V., & Stein M., 2018

This research extends prior research on the roles that accounting plays in both the construction and development of the State by exploring the ways in which accounting practices were significantly expanded and elaborated over time as a technology of government, resulting in greater power and influence being accorded to government auditing professionals. The paper focuses on how government auditing initiatives in Canada were galvanized by simultaneous initiatives taking place in the United Kingdom, United States and a range of other Commonwealth nations. It examines how Auditors-General worked both individually, and in concert, to sell the evaluative potential of accounting to key power brokers within the State, thereby creating advantageous positions for themselves.

Fighting Collusion with Disparity - An Experimental Investigation of the Effect of Pay Dispersion on Collusion in Tournaments

L. Guo, K. Huo, T. Libby - 2018

Employee collusion weakens the effectiveness of various management control tools. We propose that the pay dispersion (difference between wages among individuals in the same organization) as a potential solution to this problem because it makes employee coordination more difficult.

Exogenous Expansion of the Audit Field: Boundary and Practice Work, and the Auditing of Government Advertising in Ontario

Radcliffe V., & Stein M., 2018

This research investigates how the legitimacy of audit ideals and practices can be expanded into new jurisdictions through the activities of interested third parties, something we refer to as boundary pull. We examine how this concept of boundary pull led to the Office of the Auditor General of Ontario became seen as a legitimate reviewer of all political advertisements proposed by the Government of Ontario for political bias.

Fair Value Accounting and the Cost of Debt

Y. Shi, 2018

This study examines the association between the use of fair value accounting and the cost of debt, as well as the impact of auditor industry expertise on this association. The sample comprises U.S. financial institutions’ data between 2007 and 2014. Results suggest that more extensive use of fair value accounting measurement in the financial statements is generally associated with a higher cost of debt, which supports the argument that fair value accounting is perceived to exhibit lower reliability. Findings further show that greater reliance on Level 2 and Level 3 fair value inputs is related with a higher cost of debt, indicating that the reliability issue is primarily driven by Level 2 and Level 3 estimates. In addition, we do not find that auditor industry expertise improves the decision usefulness of fair value accounting information. These results hold even after controlling for variables associated with a financial institution`s business model.

Can Accounting Save Nature? The Case of Endangered Species

D-L. Arjalies, D. Gibassier 2017

This study examines one of the first performance indices developed by conservationists to assess their effectiveness at saving endangered species. It enriches previous research on biodiversity accounting and its consequences for the conservation of species. The article demonstrates that the use of a conservation performance index based on human incentives might encourage conservationists to focus their efforts on the animals that are most popular or likely to survive at the expense of other faunae. Based on these findings, it discusses the conditions under which the use of financial incentives can help a society address environmental concerns.

How The Prospect of Fault Influences Managers’ Compliance

M. Sooy, 2017

Through an experiment, the study examines how managers faced with fault differently understand ethical dimensions of their compliance, resulting in more frequent and higher quality compliance.

Valuing Sustainability: The Case of Responsible Investment Reporting

D-L. Arjalies, D. Laurel, and N. Mottis 2017

We examine the creation and implementation of the Reporting and Assessment Framework created by the United Nations Principles for Responsible Investment and the ways in which it enabled the diffusion of a new valuation process for sustainability.Through a longitudinal and exploratory case study that draws upon interviews,participant observation, and a wealth of archival data, we examine the sociallyconstructed democratic valuation process wherein constituents created, deliberated, and ultimately agreed upon the valuation measures and criteria.

The Effect of Study of Group Size and Feedback Type on Insight Problem-Solving Performance: A Experimental Study

L. Berger, K. Huo - 2017

Firms can benefit from understanding how intra-firm competition can improve employee innovation and problem-solving performance. We investigate how group size (large or small) and feedback type (full or partial relative performance information) affect performance in a setting where task performance is improved by identifying problem insights.

The Effects of Performance Incentives and Training on Insight Problem-Solving

K. Huo, 2016

This paper investigates whether the effect of incentives on insight problem-solving is conditional on employee skill which can be gained through training. Additionally, it explores whether non-monetary incentives can be just as effective as financial incentives in the insight problem task setting.

Accounting is the Message: An Undermining, Overmining, and Duomining Critique of Accounting Research

M.E. Persson, C.J. Napier, 2015

Making use of McLuhan’s (e.g., McLuhan, 1964; McLuhan & Fiore, 1967; McLuhan & McLuhan, 1992) ideas on the laws and functioning of the media, this paper calls for a new approach to accounting research that considers both the components and relations of accounting phenomena.

Effects of Performance-Based Pay, Social Recognition, and Training on Performance in Creative Problem Solving: An Experimental Investigation

K. Huo, 2014

This work examines the effect of different incentive schemes on employees’ effort and performance in a creative problem-solving task because current literature is divided on the effect of performance-based incentives on creative performance.