Based on theory and anecdotal evidence, we argue that ongoing implicit claims between a firm and its customers, suppliers, employees, and short-term creditors create incentives for management to choose long-run income-increasing accounting methods. Variables selected to proxy for the extent to which a firm depends on these implicit claims are found to be significant in explaining cross-sectional variation in inventory and depreciation methods. These variables remain incrementally significant when we include traditional variables found to have explanatory power in prior studies (i.e., leverage, bonus compensation, tax, and regulatory/political exposure variables).

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.

This article hypothesizes that the level of managerial ownership affects both the informativeness of earnings and the magnitude of discretionary accounting accrual adjustments. The hypothesis draws on the theory of the firm, and exploits: (1) separation of ownership from control of economic decisions, (2) the extent and consequences of accounting-based contractual constraints, and (3) managers' incentives in selecting and applying accounting techniques. Results show managerial ownership is positively associated with earnings' explanatory power for returns and inversely related to the magnitude of accounting accrual adjustments. Moreover, ownership is less important for regulated corporations, suggesting regulation monitors managers' accounting choices.