Managers must understand relations among costs in order to make decisions. Prior literature assumes managers' use of cost accounting system output is affected by the information coming from the system, but not by the design of the cost system itself. This study examines how the classification of costs into cost pools affects the accuracy of individuals' understanding of relations among costs. I hypothesize that individuals will estimate relations between costs in the same cost pool first and thus more accurately than relations across different pools, because cost pools provide strong cues that meaningful relations are likely to exist within, but not across, pools. I also hypothesize that cost location (within- versus across-pool) has a greater effect on individuals' judgment accuracy when relations among costs are negative than when they are positive. Experimental results are generally consistent with these hypotheses. This experiment shows that cost pool classification choices not only affect the information managers receive, but also their interpretation and use of that information. Data Availability: Contact the author.

We examine the valuation of financial statement note information at the time of 10-K filings. We find that stock returns around 10-K filings are positively related to accounting adjustments calculated from financial statement note information. We further document that the likelihood of equity analysts issuing a report and updating their target price estimates at the 10-K dates is increasing in the magnitude of the adjustments. Those analysts who do update their target prices at this time revise their estimates consistent with the sign and magnitude of the adjustments. These findings are consistent with financial statement users utilizing financial statement note information to make accounting adjustments, thereby incorporating this information into stock prices. JEL Classifications: G14, G29, M40, M41, M44. Data Availability: All data are publicly available from the sources identified in the article.

We conduct three experiments to test if investors' views about fair value are contingent on whether the financial instrument in question is an asset or liability, whether fair values produce gains or losses, and whether the item will or will not be sold/settled soon. We draw on counterfactual reasoning theory from psychology, which suggests that these factors are likely to influence whether investors consider fair value as providing information about forgone opportunities. The latter, in turn, is predicted to influence investors' fair value relevance judgments. Results are generally supportive of the notion that judgments about the relevance of fair value are contingent. Attempts to influence investors' fair value relevance judgments by providing them with information about forgone opportunities are met with mixed success. In particular, our results are sensitive to the type of information provided and indicate the difficulty of overcoming investors' (apparent) strong beliefs about fair value. Data Availability: Contact the authors.

This study explores how initial control choice influences the ease with which outsourcing firms switch suppliers. We recognize that firms invest in controls to manage collaborative relationships, and argue that these investments generate switching costs, namely, opportunity and reinvestment costs. We collect data on outsourcing transactions by conducting semi-structured interviews across multiple field sites. Observed patterns across 53 cases show that firms with trust-based controls experience the most difficulty in switching suppliers, whereas firms with market-based controls experience the greatest ease. Firms with bureaucratic-based and hybrid controls generally lie between these extremes. Furthermore, in nearly 50 percent of our sample (25 cases), respondents indicate that the switching costs associated with control choices increase the difficulty of switching suppliers. We also find evidence that the magnitude and nature of switching costs vary with the types of controls chosen. Data Availability: Data used in this study cannot be made public due to confidentiality agreements with participating firms.