[Excerpt] This study examines the relation between the level of institutional investor ownership and the magnitude of security price variability at quarterly earnings announcement dates. Prior research consistently documents a negative association between firm size and announcement-date return variability. One explanation for this finding is that as more timely, alternative information becomes available on large firms prior to an announcement date, their security prices become informative, thereby reducing the information content of the earnings announcement. Large firms are closely followed by institutional investors. These investors dedicate substantial resources to information search. Therefore, the link between size and information production may be attributable to the influence of institutional investors on the information production process. Because institutional trades can also affect security prices, however, the precise impact of institutional following on the variability of prices at quarterly earnings dates is not evident.

[According to the December 1991 issue of the Survey of Current Business, expenditures of state and local governments account for more than 11 percent of the U.S. gross domestic product. Moody's 1991 Municipal Manual indicates that these governmental entities have an outstanding debt now approaching $800 billion, and a report by the Public Securities Association (1987) indicates that this debt grew at a compound annual rate of 12 percent from 1966 to 1986. State and local governmental activities continue to increase in magnitude, and evidently form an important part of the political and economic environment in which accounting operates. Important accountability issues distinctive to these organizations need accounting research attention. The articles by Feroz and Wilson and Deis and Giroux in this issue, which we have been invited to review, address some of these topics. The study by Feroz and Wilson can be regarded as an extension to the public sector of capital-market-based research that examines the effects of financial-accounting disclosures on security prices and returns. They hypothesize segmentation of the market for municipal obligations along national and regional lines and study the effects of differential information disclosure on borrowing costs. In the other study, Deis and Giroux utilize quality reviews that were conducted by the Texas Education Agency to evaluate and rate the audits (by public accountants) of public schools' financial reports. They test hypotheses about audit quality that were originally developed in the context of commercial firms. Both studies thus represent extensions of theories and methods used in research of private-sector accounting and auditing issues. The contributions of the two articles are discussed, and modifications that consider the unique aspects of governmental accounting are presented in sections I and II. Other possible avenues for research are discussed in section III.]

Empirical validity of the claim that overhead costs are driven not by production volume but by transactions resulting from production complexity is examined using data from 32 manufacturing plants from the electronics, machinery, and automobile components industries. Transactions are measured using number of engineering change orders, number of purchasing and production planning personnel, shop-floor area per part, and number of quality control and improvement personnel. Results indicate a strong positive relation between manufacturing overhead costs and both manufacturing transactions and production volume. Most of the variation in overhead costs, however, is explained by measures of manufacturing transactions, not volume.

Recent studies report an increasing use of nonfinancial measures such as product quality, customer satisfaction, and market share in performance measurement and compensation systems. A growing literature suggests that because current nonfinancial measures are better predictors of long-term financial performance than current financial measures, they help refocus managers on the long-term aspects of their actions. However, little empirical evidence is available on the relation between nonfinancial measures and financial performance, and even less is known about performance impacts of incorporating nonfinancial measures in incentive contracts. Using time-series data for 72 months from 18 hotels managed by a hospitality firm, this study provides empirical evidence on the behavior of nonfinancial measures and their impact on firm performance. The results indicate that nonfinancial measures of customer satisfaction are significantly associated with future financial performance and contain additional information not reflected in the past financial measures. Furthermore, both nonfinancial and financial performance improve following the implementation of an incentive plan that includes nonfinancial performance measures.

Much management accounting research focuses on design of incentive compensation contracts. A basic assumption in these contracts is that performance-based incentives improve employee performance. This paper reports on a field test of the multi-period incentive effects of a performance-based compensation plan on the sales of a retail establishment. Analysis of panel data for 15 retail outlets over 66 months indicates a sales increase when the plan is implemented, an effect that persists and increases over time. Sales gains are significantly lower in the peak selling season when more temporary workers are employed.

Abstract According to the December 1991 issue of the Survey of Current Business, expenditures of state and local governments account for more than 11 percent of the U.S. gross domestic product. Moody's 1991 Municipal Manual indicates that these govern- mental entities have an outstanding debt now approaching $800 billion, and a report by the Public Securities Association (1987) indicates that this debt grew at a compound annual rate of 12 percent from 1966 to 1986. State and local governmental activities continue to increase in magnitude, and evidently form an important part of the political and economic environment in which accounting operates. Important accountability issues distinctive to these organizations need accounting research attention. The articles by Feroz and Wilson and Deis and Giroux in this issue, which we have been invited to review, address some of these topics. The study by Feroz and Wilson can be regarded as an extension to the public sector of capital-market-based research that examines the effects of financial-accounting disclosures on security prices and returns. They hypothesize segmentation of the market for municipal obligations along national and regional lines and study the effects of differential information disclosure on borrowing costs. In the other study, Deis and Giroux utilize quality reviews that were conducted by the Texas Education Agency to evaluate and rate the audits (by public accountants) of public schools' financial reports. They test hypotheses about audit quality that were originally developed in the context of commercial firms. Both studies thus represent extensions of theories and methods used in research of private- sector accounting and auditing issues. The contributions of the two articles are discussed, and modifications that consider the unique aspects of governmental accounting are presented in sections I and II. Other possible avenues for research are discussed in section III.