ABSTRACT On the occasion of The Accounting Review’s centennial, I bring renewed urgency to the need for management accounting research to have practical relevance given the budgetary pressures on higher education. Practically relevant research is also relevant in the classroom. I present three ideas to increase the practical and teaching relevance of management accounting research. First, study the heterogeneity in management accounting practices across industries and embrace single-industry research deep dives. Second, focus on the role of management accounting in decision-making, planning, and forecasting. Third, explore the connections of management accounting with other subfields in accounting as well as other business disciplines.

Abstract We provide a comprehensive overview of accounting-related regulatory changes (financial accounting, auditing, tax, and other disclosures) in the 27 European Union countries and the United Kingdom since 1993 based on an extensive literature review, survey, and topic and country expert input. Across all countries and years, we find that more than 16 regulatory events occur in a typical difference-in-differences research design that includes pre- and post-periods of four years. On average 3.4 out of four accounting disciplines are affected, emphasizing the need for interdisciplinary awareness. Our accompanying website ( http://www.eu-regulations.com ) offers visual representations of these events, regulation summaries, literature links, and source documents, all by country. This work aims to (1) lower the cost for researchers, reviewers, and editors to understand the EU’s evolving regulatory landscape; (2) improve research designs by identifying concurrent regulatory events; and (3) highlight research opportunities for those studying the EU or specific member states.

We show that firms׳ ability to avoid taxes is affected by the quality of their internal information environment, with lower effective tax rates (ETRs) for firms that have high internal information quality. The effect of internal information quality on tax avoidance is stronger for firms in which information is likely to play a more important role. For example, firms with greater coordination needs because of a dispersed geographical presence benefit more from high internal information quality. Similarly, firms operating in a more uncertain environment benefit more from the quality of their internal information in helping them to reduce ETRs. In addition, we provide evidence that high internal information quality allows firms to achieve lower ETRs without increasing the risk of their tax strategies (as measured by ETR volatility). Overall, our study contributes to the literature on tax avoidance by providing evidence that the internal information environment of the firm is important for understanding its tax avoidance outcomes.

ABSTRACT We explore the theoretical relation between earnings and market returns as well as the properties of earnings frequency distributions under the assumption that managers use unbiased accounting information to sequentially decide on real options their firms have and report generated earnings truthfully, with the market pricing the firm based on those reported earnings. We generate benchmarks against which empirically observed earnings‐returns relations and aggregate earnings distributions can be evaluated. This parsimonious model shows a coherent set of results: reported losses are less persistent than reported gains, decision making diminishes the S‐shaped market response to earnings and earnings relate to returns asymmetrically in the way documented by Basu [1997]. Furthermore, the implied frequency distribution of aggregate earnings is neither symmetric nor necessarily single‐peaked. Instead, it may exhibit a kink at zero and look similar to the plots reported by Burgstahler and Dichev [1997]. However, within our model, none of these phenomena are due to reporting noise, bias, or some undesirable strategic managerial behavior. They are the natural consequences of using past earnings as the basis for value increasing managerial decision making that in turn generates the future earnings on which future decisions will be based.

ABSTRACT We develop a theoretical model of the firm that links properties (stewardship vs. valuation focus) of financial reporting regimes with the informational properties of optimal managerial accounting systems. We show that, contrary to the standard textbook proposition, properties of management and financial accounting systems are not independent. Significantly, we provide an explicit connection between exogenous and observable properties of a firm's financial reporting system and the quality of the managerial accounting system on which manager(s) base real economic decisions. As the quality of those economic decisions can also be inferred from publicly available data, our theory generates new opportunities for empirical managerial accounting research on large nonproprietary samples. Further, by being able to identify enhanced performance due to improved managerial accounting information, our theory provides opportunities to gain a better understanding of the link between particular managerial accounting practices and the quality of the information produced.

Although employees' time estimates are used extensively for costing purposes, they are prone to measurement error. In an experimental setting, we research how measurement error in time estimates varies with: (1) the level of aggregation in the definition of costing system activities (aggregated or disaggregated); (2) task coherence (the extent to which the activities that require time estimates present themselves coherently or incoherently); and (3) when notice is given that time estimates will be required (in advance or after the fact), that is, whether participants know that time estimates will be required before they perform the activities. We also test on response mode (estimates in percentages or absolute time units). The results suggest an important trade-off between the level of aggregation and measurement error: increasing aggregation in the definition of activities leads to lower measurement error. Also, advance notification reduces measurement error, especially in settings with aggregated activities or incoherent tasks. Finally, we find a strong overestimation bias when participants provide time estimates in minutes, which may be problematic for Time-Driven Activity-Based Costing that advocates the use of estimates in minutes. These results are relevant to accountants and decision makers who want to assess and control the measurement error in their costing system and to professionals in related areas that make use of time estimates (e.g., billing, tendering).

Cost accounting systems provide accurate costs only under stringent conditions. However, we know little about the nature, level, and bias of costing errors. This paper reports the results of a simulation study of two-stage cost allocation systems that provide the following main insights: (1) partial improvement in the costing system usually increases the overall accuracy of reported product costs except in specific cases identified in this paper where errors have an offsetting effect, most notably when there is aggregation error in the activity cost pools and measurement error in the resource drivers; (2) the impact of Stage II costing errors on overall accuracy is stronger than that of Stage I errors, so system refinements should focus on Stage II; and (3) the presence of aggregation and measurement errors usually results in relatively more products being under- than over-costed, with large amounts of over-costing for a few “big-ticket” (in dollar terms) products, and small amounts of under-costing for a larger number of less expensive products.

ABSTRACT Using Census microdata on 28,000 manufacturing plants, we examine how firms manage employee retention concerns. In response to reductions in the local unemployment rate, plants take additional steps beyond increasing compensation. First, plants adjust bonus architecture to ensure bonuses can be paid. Second, plants offer more agency to employees by deploying high-involvement work practices that generate longer-term commitment. Third, plants pull these retention levers less when they have high availability and use of data as this reduces the adverse effects of employee turnover on organizational knowledge. These results are robust to using the fracking revolution as a shock increasing firms’ retention concerns. Additionally, we observe that although compensation increases tend to spill over to other plants within the same firm—aligning with theories of inequity aversion—adjustments to bonus architecture and the provision of employee agency do not, suggesting these may be more cost-effective strategies for multiplant firms. JEL Classifications: J63; M51; M54.

We examine the relation between plant-level predictive analytics use and centralization of authority for more than 25,000 manufacturing plants using proprietary US Census data. We focus on headquarters' authority over plants through delegation of decision-making and design of performance-based incentives. We find that increased predictive analytics use is associated with reduced delegation of decision-rights to local managers, increased centralization of control over data gathering and reduced plant managerial payrolls. In terms of incentives, predictive analytics use is associated with more accurate targets and tighter linkages between rewards to workers (performance-based bonuses, promotions and firings) and measured performance. Overall, our findings suggest that predictive analytics use is associated with increased centralization of authority in headquarters.