Reviews the book "Trade Balances during Business Cycles," by Ilse Mintz.

Reviews the book "Financial Accounting Theory I: Issues and Controversies," 2nd ed., edited by Stephen A. Zeff and Thomas F. Keller.

Reviews the book "Advanced Accounting," by Walter B. Meigs, Charles E. Johnson and Thomas Keller.

Reviews the book "Reporting and Investment Decisions," by Alan Robert Cerf.

Schrand and Walther's (2000) archival evidence suggests that managers strategically disclose prior-period benchmarks in current earnings announcements, which, in turn, influences investors' judgments. Using a controlled experimental setting, I present evidence confirming that a transparent description of a transitory prior-period gain or loss affects how investors apply prior-period earnings when evaluating currentperiod earnings. I also provide evidence that this effect is likely to be unintentional on the part of investors, resulting from limitations in their memory for the prior-period event. Overall, the experimental results suggest that a quantitative description of the transitory prior-period gain or loss in a current earnings announcement helps investors to evaluate company performance. The results also highlight the need for consistency in reporting non-GAAP financial performance measures.

Editors exhort authors to circulate and present their working papers to colleagues before submitting them to journals (Zimmerman 1989; Green et al. 2002). Authors heeding such advice are said to increase the likelihood of getting their work published and making their research, once published, more influential (Zimmerman 1989). While evidence regarding these matters is of keen importance to authors, editors, and administrators, no research exists showing that circulating and presenting manuscripts increases their probability of being accepted in accounting journals or, when published, their influence on stimulating other research. I present such evidence by perusing acknowledgments in premier accounting journals. I examine the relation between circulating and presenting manuscripts and the probability of acceptance by relating acknowledgments of 305 papers submitted to The Accounting Review during June 2002–May 2003 to the editor's reject versus revise and resubmit decision. I examine the relation between circulating and presenting manuscripts and an article's influence by relating the acknowledgments in 256 articles published in The Accounting Review, Journal of Accounting Research, and Journal of Accounting and Economics to citations to these articles. My two analyses of acknowledgments to institutions, conferences, and individuals yield similar results. I find that papers presented at more workshops are more likely to be invited back to The Accounting Review, and that papers published in The Accounting Review, Journal of Accounting and Economics, or Journal of Accounting Research generate more citations if they were presented previously at more workshops.

This study investigates whether compensating chief executive officers and business-unit managers using after-tax accounting-based performance measures leads to lower effective tax rates, the empirical surrogate used for tax-planning effectiveness. Utilizing proprietary compensation data obtained in a survey of corporate executives, the relation between effective tax rates and after-tax performance measures is modeled and estimated using a two-step approach that corrects for the endogeneity bias associated with firms' decisions to compensate managers on a pre- versus after-tax basis. The results are consistent with the hypothesis that compensating business-unit managers, but not chief executive officers, on an after-tax basis leads to lower effective tax rates.

Reviews the book `The Accountant's Guide to Legal Liability and Ethics,' by Mark J. Epstein and Albert D. Spalding, Jr.

[This study examines participative budgeting in the context of the psychology of risk. As Young (1985) and Waller (1988) report, there is some preliminary evidence that risk-averse workers create more budgetary slack than risk-neutral ones. They show that "truth inducing incentive schemes" (e.g., Soviet incentive schemes; see Weitzman 1976) reduce budgetary slack for risk-neutral subjects but not for risk-averse subjects. If this is true, it means that resource allocations within organizations are mediated by perceptions of risk. Young (1985) and Waller (1988) define risk preference as a dispositional variable, which presumes that it is a stable personal trait, a latent variable, traditionally inferred from observed behavior of risk propensity in such settings like lotteries. This study tests whether risk preferences are domain-specific; that is, latent risk preferences translate into differing manifest risk preferences according to the context. Domain-specific risk preference can be understood as a manifest psychological variable that may well be the result of the combination of latent risk propensity and the situation. Kahneman and Tversky's prospect theory (1979) suggests that manifest risk preferences depend upon whether the subject frames his or her task in the context of gain or loss prospects, where gains and losses are defined in relation to a neutral reference point. If risk preferences are domain-specific, then past studies' suggestion that incentive schemes should be designed in consideration of dispositional, or latent, risk preferences needs to be reexamined (Waller 1988; Kaplan 1982). The question before this study is: If subordinates are influenced by prior period performance in setting current period budgets for themselves, will that influence take the form predicted by prospect theory and thus lead to riskier preferences (tight budgets) when the subordinates perceive themselves in a losing situation? This is an important question considering Young's (1985) alluding to the possibility that inducing subordinates to less risk-averse behavior may be a way to favor tight budgetary standards and reduce slack. This prediction is consistent with prospect theory's implication that losers who are slow to adjust their reference point act in a more risk-seeking manner. Thus, the induction of losing prospects might be a way to minimize budgetary slack. An additional concern in this study is to jointly test domain-specific risk preferences and dispositions toward risk as influences over budgetary decisions. Whereas prospect theory explains risk preferences as domain-specific contingencies, other theories construe risk preferences as dispositional. It is likely that both domain-specific and dispositional factors influence budgetary decisions. This study deploys a conventional lottery procedure to elicit and test dispositions toward risk. An experiment simulating the public accountants' budgeting of billable hours was designed to test the hypothesis that subject preference for tight or safe budget behavior depends on the performance of coworkers and domain-specific risk preferences. The hypotheses were tested in an experiment employing 81 students. The results generally support the view that subordinates' risk preferences are influenced by a situation-dependent variable. The reversal of risk preferences around a neutral reference point is statistically significant for both dispositionally risk-averse and dispositionally risk-seeking subjects. The dispositional variable also contributes to the explanation of variations in subjects' manifest risk preferences. Thus the propensity to induce budgetary slack seems to be a joint function of situations and dispositions.]

Examines participative budgeting in the context of the psychology of risk. Theoretical background on risk preferences; Empirical evidence of domain-specific risk preferences; Study design; Dispositional risk attitude measurement; Preference ratings of risk-averse versus risk-taking groups; Limitations of the study.