Knowledge that Transforms

Abstract This study examines the benefits and costs to a company of publicly announcing that it is seeking a potential sale or merger. I find that the announcement leads to increased market attention and a more robust merger and acquisition sales process—the benefits of improved transparency. However, I also find evidence of the announcement alienating stakeholders and increasing business disruption—the costs of credible disclosure. I document the countervailing valuation effects of these benefits and costs, where the net valuation effect depends on whether the company is subsequently acquired. This research is important because it (1) demonstrates the disclosure's impact on the company through multiple channels, (2) estimates the valuation effects, and (3) identifies key considerations for investors and other stakeholders who bear the consequences of such a disclosure.

Abstract By conducting in‐depth interviews with 40 migrant and local accountants living and working in Dubai, the paper demonstrates how individual accountants draw on the global city as they make sense of and reconstruct professional identities and social boundaries of inclusion/exclusion. The analysis builds on Zygmunt Bauman's three social spacing processes: cognitive, aesthetic, and moral. The findings from lived experiences show that through cognitive spacing , the construction of other nationality groups of accountants as “strangers” is essential to the construction of participants' professional identities. Boundaries between groups of accountants are constructed in professional spaces (e.g., offices, teams, departments, sectors, firms, senior positions) through stereotype‐based identity work, stigmatizing accountants from different nationalities, as well as constructing cultures and qualifications as suitable or unsuitable for these spaces. In aesthetic spacing , boundaries and identities are constructed around the extent of freedom to be mobile, travel, and live pleasurably. This gives rise to the “tourist” and “vagabond” categories of accountants, constructing boundaries around who should be included/excluded in senior positions, based on the transitional power of their passports. In moral spacing , some accountants reflect and use their agency to transcend and resist boundaries constructed in cognitive and aesthetic spaces. They enact a moral self, where relationships with “stranger” accountants are based on moral responsibility and care for the Other. Attention to spacing processes in the global city demonstrates how individual accountants are active agents in reconstructing inclusion/exclusion boundaries and divisions in the profession. The findings indicate that if we are to foster a more open and inclusive profession, there is a need to consider spatial/spacing dimensions in both the city and the profession.

Abstract We use multiple methods to examine how depletion and auditors' skeptical dispositions interact to affect auditors' challenging of managers in negotiations over financial statement amounts. We expect auditors are likely depleted from effortfully exercising self‐regulation during the busy times when these negotiations occur. Individuals in a depleted state tilt toward natural, less effortful behaviors. Thus, we posit that the effects of depletion will diverge depending on the auditor's skeptical disposition—a determinant of how natural or effortful they will find the skeptical behaviors (e.g., challenging) versus client service behaviors (e.g., maintaining the client relationship and audit efficiency) required for negotiations. We predict that client service auditors (i.e., low skeptics) will challenge managers less in negotiations when depleted versus non‐depleted, while high skeptic auditors will challenge more when depleted. We test this interactive prediction in an abstract experiment where we manipulate depletion and measure auditors' skeptical dispositions using trait skepticism. Findings support our predictions. We also develop a new measure of auditors' client service–skeptic disposition based on the skepticism literature that adds nuance to the traditional lower versus higher skeptic labels. In a second study, interviews with audit partners validate the realism of our depletion and client service–skeptic constructs and corroborate our experimental findings. Our study sheds light on depletion effects in auditors' negotiations with their clients and how the effects differ based on auditor personalities.

Abstract Audit firms hesitate to take full advantage of data and analytics (D&A) audit approaches because they lack certainty about how external reviewers evaluate those approaches. We propose that external reviewers use an effort heuristic when evaluating audit quality, judging less effortful audit procedures as lower quality, which could shape how external reviewers evaluate D&A audit procedures. We conduct two experiments in which experienced external reviewers evaluate one set of audit procedures (D&A or traditional) within an engagement review, while holding constant the procedures' level of assurance. Our first experiment provides evidence that external reviewers rely on an effort heuristic when evaluating D&A audit procedures—they perceive D&A audit procedures as lower in quality than traditional audit procedures because they perceive them to be less effortful. Our second experiment confirms these results and evaluates a theory‐based intervention that reduces reviewers' reliance on the effort heuristic, causing them to judge quality similarly across D&A and traditional audit procedures.

ABSTRACT Management control systems (MCS) have been known to produce unintended, dysfunctional consequences. However, relatively little is known about how MCS can contribute to the inertia and even decline of a firm. Our analysis in the abductive mode was triggered by a surprising case study observation that although Nokia Mobile Phones (NMP) certainly had many capabilities that could have facilitated a timely response to disruptive environmental change, this did not happen. In developing an explanation for this, we draw on the managerial cognitions literature, showing how the cognitions at NMP, developed in the era of organizational success, became embedded in its MCS. This embeddedness, in turn, intensified existing cognitions. As the cognitions became less accurate over time, the once effective MCS started to cause various inertial effects, such as suboptimal and slow decision‐making. We contribute to the literature on the dysfunctional consequences of MCS by theorizing how MCS can contribute to inertia via cognitions in two ways: first, by reinforcing prevailing cognitions and hence preventing management from realizing a need for change; and second, by moderating the impact cognitions have on actions by delaying actions based on renewed cognitions. Both ways may be fatal, especially in hyper‐competitive contexts.

ABSTRACT This study critically evaluates research published by Contemporary Accounting Research ( CAR ) between 1984 and 2021 using bibliometric analysis. We examine the following: (i) CAR 's publication quality and the factors associated with its citations and (ii) CAR 's scope regarding research diversity, methods, authors geographical dispersion, and collaborative networks. The methodology permits observation of finer collaboration details and research patterns not apparent by simply categorizing the data. We use tools such as performance analysis, coauthorship analysis, bibliographic coupling, and regression analysis. The bibliometric analysis shows improvement in CAR 's CiteScore and source‐normalized impact per paper over time, consistent with publishing high‐quality research. Our analysis reveals that authors' geographical affiliations, research subject areas, and research methods are not systematically associated with citations across our various subsamples. A notable exception is that research on audit topics generates more citations than studies examining financial accounting topics. Other factors significantly and positively associated with citations include article age, article length, number of authors, order of author names, and number of references. We also show that CAR has become more diverse regarding author affiliations, subject areas, and research methods than most leading accounting journals. Only Accounting, Organizations and Society emerges as more diverse, thereby serving as a benchmark for CAR in the future. CAR should consider focusing on high‐interest areas to boost citations and tightening its acceptance criteria.

Abstract The Sarbanes‐Oxley Act charges management with the primary responsibility for internal control over financial reporting (ICFR). However, prior research tells us little about the ICFR process from management's perspective. We develop a theoretical model of the ICFR process from management's perspective and examine that model by surveying 145 and interviewing 35 accounting executives at large US public companies. Our primary finding is that executives feel constrained in their ability to direct ICFR and hold perspectives that reflect these constraints. Specifically, most executives feel compelled by auditors to follow the PCAOB's preferences even though executives believe these preferences often tend to distract management and auditors from riskier areas. Executives also believe that audit committees' involvement in ICFR is too passive and that auditors' assessments are sometimes too severe, prompting executives to push back on auditors. Overall, executives strive to make decisions that are optimal for their ICFR, but limited resources and other business conditions, such as restructuring events and lack of qualified personnel, limit the effectiveness of their ICFR efforts. We discuss the implications of our results for practitioners, regulators, and researchers.