Knowledge that Transforms

We examine whether financial performance metrics in CEO compensation contracts provide incentives for environmental performance improvement, and the conditions under which such incentives arise. Using toxic pollution as our primary outcome, we find that relative financial performance evaluation (RPE) is negatively associated with future pollution in firms whose environmental impacts are subject to greater scrutiny, whereas other financial incentives, such as equity portfolio delta and new equity grants, show no such association. This pattern is consistent with theories of corporate social responsibility and, as supported by complementary tests, with the idea that stronger environmental performance can improve a firm’s relative financial position by attracting customers, employees, and shareholders from less responsible peers. We further show that the RPE-pollution relation varies predictably with various RPE plan characteristics and stakeholder switching costs, persists when we instrument for the use of RPE, and operates in part through increased environmental innovation.

We propose life history (LH) theory as an overarching theoretical explanation of CEO preferences and decision-making. LH theory has the potential to integrate prior research on variation in top executives’ impact on decision outcomes and to demonstrate how observable differences in behavior can be explained by evolutionary drivers. According to LH theory, individuals pursue fast or slow LH strategies. Fast individuals tend to follow accelerated reproduction strategies and engage in impulsive, opportunistic, and risk-seeking behavior. We theorize how CEO LH strategies shape both on-the-job and off-the-job decisions and thus add to a growing body of research on evolutionary drivers of preferences and decision-making in accounting. We measure CEO LH strategies based on biodemographic micro-data related to reproductive behavior. Our findings linked to on-the-job decisions suggest that firms managed by CEOs who pursue fast LH strategies exhibit more financial irregularities, lower accounting conservatism, and higher earnings management. Findings related to CEO off-the-job decisions show that fast CEOs are more likely to engage in criminal behavior and to have a higher conspicuous consumption and a higher personal leverage. By applying an LH theory lens, we reconcile and advance prior fragmented research on CEO preferences by showing a clear theoretical link between on-the-job and off-the-job decisions.

We examine the effect of disclosing the potential financial impact of sustainability activities (FISA) on investor decisions. We posit and find that the effect is moderated by both companies' financial condition and investors' view on sustainability. Our results suggest that investors with a stakeholder value-maximization view are not sensitive to the FISA disclosure regardless of the company's financial condition. However, investors holding a shareholder expense view exhibit significantly higher investment interest in the presence of a FISA disclosure when the company's financial condition is favorable, but not when it is unfavorable. Additional analysis suggests that the presence of FISA leads to differential belief updates for investors with different ex-ante beliefs about the benefits of sustainability. Our study provides practical insights into the effect of disclosing the financial effects of sustainability activities. It has implications for integrated reporting and the disclosure of the connectivity between sustainability and financial performance proposed by standard setters. It also contributes to the literature on the relevance of non-financial information and investor type to investment decisions.

Over the past two decades, policy and regulation in social and healthcare settings, as well as across public service delivery more broadly, have placed increasing emphasis on “user voice” and “user experience” in the commissioning and evaluation of services. Yet the formats and methods through which such accounts of user feedback should be produced often remain indeterminate. This paper examines the organizational processes involved in eliciting, assembling, and representing “user voice” within a large social care organization. Drawing on an ethnographic study, we investigate how the organization responds to diverse user feedback requests from external bodies, such as commissioners and regulators, as well as to internal demands for useable and appropriate accounts. Building on Hacking's concept of dynamic nominalism and his later engagement with Goffman, we analyse how user voice is “made up” through processes of tracing, framing, and connecting in the interstices between locally situated lived experiences of service users and top-down professional and regulatory discourses of care and service quality. Our analysis demonstrates the multiplicity, ambiguity and situational malleability of user voice, revealing how it both expands and escapes classification. Together, these dynamics highlight the lateral, transversal movements that occur in the interplay between top-down abstract classifications and bottom-up practices and situated concerns of the classified. The paper concludes by reflecting on both the organizational appeal and the potential dangers of demands for user voice.

Organisational accounts are often awarded considerable significance in societies, not least because of their proposed beneficial implications. However, we argue that in accounting research the narrative (non-financial) accounts, often given by organisations in more than one language, have been approached in a limited way. Drawing on foundational concepts from the discipline of Translation Studies, we demonstrate that accounts provided in different languages are not just one equivalent account copied across languages but in fact an ‘account multiple’ of several parallel accounts . Organisations (can) use such parallel accounts to address different audiences, simultaneously constructing different worlds where accountability does not remain the same. Alongside our theoretical discussion, we illustrate parallel accounts through an empirical analysis of the Finnish and English language account(s) a Finland-based MNC gave on its social responsibility. We argue that considering different language accounts as parallel accounts has significant implications for research on narrative reporting, including how scholars interpret organisational accounts, their use and potential implications, with consequences extending further into research transparency, ethics and quality.

Prior accounting and economics research suggests that tournaments with highly concentrated prizes attract the most talented individuals. However, this research assumes that tournament entrants have granular, reliable information about their relative skill level. Using a laboratory experiment, we replicate this result: when relative skill information is available, prize concentration leads to skill-based selection. However, when relative skill information is unavailable, and tournament choice is public, we find that highly concentrated prizes instead attract more narcissistic individuals. Together, our results suggest that high-level positions with exceptionally large prizes can attract narcissistic applicants when entry decisions are publicly observable and relative skill information is limited. These findings inform both theory and practice by clarifying when tournament prize concentration selects for skill versus personality.

Employers often give employees general pay increases that are not tied to individual performance. These pay increases can either be unconditional fixed pay raises such as cost-of-living adjustments or be tied to risky firm-level measures of performance (e.g., profit-sharing). We use two experiments and a survey to investigate how employees' position in the firm's value chain affects their psychological ownership of the firm and subsequently their preferences for different types of pay increases. We find theory-consistent evidence that employees exhibit higher levels of psychological ownership of their organization when they add value to their firm's products and services directly (i.e., are primary workers who produce goods or services) rather than indirectly (i.e., are support workers such as janitorial or safety staff) and that this in turn increases their preferences for a profit-sharing pay increase relative to an unconditional pay increase. We discuss the implications of adopting a “value chain” perspective when designing employee compensation packages.

Whereas previous research has largely focused on the top-down establishment of the business partner role, we study bottom-up efforts by individual management accountants to increase their involvement in business partnering and the association of these efforts with their personality. Taking a job crafting perspective, we argue that management accountants may self-initiate changes in their job boundaries toward business partnering. We further argue that management accountants’ job crafting is associated with their plasticity, a disposition for exploration, and the pursuit of new experiences. Drawing on a survey among management accountants employed at a large European bank, we find support for our hypotheses that plasticity has a positive association with job crafting and, through job crafting, with business partnering. Interestingly, this finding particularly holds for management accountants who are not formally required to act as business partners. Our results thus underline that plasticity is a personality trait that can give rise to self-initiated role changes toward business partnering. The results also show that the positive association between job crafting and business partnering is stronger in contexts of tight financial control, which supports our theoretical argument that such contexts provide a greater potential for enhancing the meaningfulness attached to business partnering. Overall, our study highlights that business partnering among management accountants is not inherently linked to their formal job descriptions. Rather, it may emerge as a consequence of self-initiated changes to the job undertaken by individuals possessing appropriate personality traits.

This study investigates the joint effects of the extent of superior discretion in bonus allocations and the degree of mutual monitoring within teams on team output and unproductive influence activities of employees. Increasing discretion granted to superiors allows them to use their private information to motivate effort. Prior literature, however, also stresses that increasing discretion induces employees to engage in unproductive activities to influence bonus allocations. Drawing on behavioral theory, I argue and show that when superiors only have narrow discretion over bonus allocations and, hence, employees have few pecuniary incentives to engage in influence activities, team output increases with higher degrees of mutual monitoring in teams. In this case, employees are better able to effectively coordinate their efforts. This positive effect of mutual monitoring, however, diminishes as superior discretion over bonus allocations increases. In this case, employees’ greater engagement in influence activities undercuts their ability to coordinate on high team output with higher degrees of monitoring. This study contributes to the literature on discretionary bonus pools by providing evidence on the joint effects of superior discretion and mutual monitoring on team outcomes and by identifying conditions under which limiting superior discretion becomes more beneficial.