Prior studies on real earnings management (REM) focus mainly on estimating abnormal operating and investing activities at the firm level. We extend this literature by providing micro-level evidence regarding how financial reporting pressures influence new product release decisions, or product-level REM. Specifically, we compare how public and private studios differentially time the release of their movies. We find that, faced with pressure to boost quarterly revenues and earnings, public studios are more likely to release movies with high expected revenues in the last month of a fiscal quarter, compared to private studios. This documented result is stronger for firms with recent poor past performance, but is not present for movies in genres with a more targeted release window (e.g., romance and horror movies) and those using directors who have a history of collaboration with the studio. These results suggest that studios choose REM activities that have a lower impact on consumer demand and that minimize conflict with talent, consistent with choosing less costly activities to achieve financial reporting goals. A negative consequence of this financial reporting–driven product release strategy is that movies released in the last month of a quarter have lower international box office revenues. Taken together, these results provide evidence of the existence and consequences of product-level REM.

We examine the application of real options within two contexts of motion picture investment decisions by studio executives. The first is whether to continue marketing a film following its initial release in theaters (an abandonment option). The second centers on the decision to produce a sequel to an original film (a growth option). Few accounting studies have examined the use of real options but they are of considerable importance to companies managing risk through their cost structure and capital investment decisions. Specifically, a real option allows decision makers to postpone further expenditure commitment until a substantial portion of the uncertainty surrounding the investment has been resolved. Our evidence from the motion picture industry indicates that studios leave a portion of their marketing budget uncommitted until its spending is warranted. We also show that studios invest more in original films that they believe will lead to a sequel. Specifically, we find that studios spend higher production and marketing costs on films with sequels than those without, and that sequels generate higher returns on investment than non-sequels. Overall, our results suggest that the real options framework has applications for accounting research and practice by providing a basis for studying and understanding cost commitments in product or project-based settings.

We examine the structure of communications in accounting research by analyzing patterns of citations among authors who have published in five major journals between 1984 and 2008. Understanding communication structures is important because they shape academic knowledge creation, which prominent scholars have claimed has become narrowly focused and self-perpetuating in accounting due to a specific type of communication structure - 'tribalism.' We use a mathematical algorithm and other analyses to distinguish among five types of communication structures. We find that the field contains multiple clusters, with some clusters being centered on research topics alone, a finding consistent with a 'normal academic field.' Remaining clusters are more narrowly based – on combinations of topics, methods and theory bases – and all but one of them represent a “small world” structure because they are close together and exhibit frequent communication. Both normal academic fields and small worlds have been shown to contribute positively to innovation in research. The economics-based archival financial accounting cluster exhibits some properties of a tribal structure because, while researchers in other clusters communicate toward this cluster, the cluster sends most of its outbound communication to itself. A contribution of our study is that it shows that tribalism is not as rampant as previously suggested. Also, our findings suggest the field has become less tribal over time. Further, we identify 'hub' researchers who attract communications from multiple clusters and whose articles build on, and cite, work from multiple clusters. These individuals are instrumental in moving fields away from tribalism. Finally, we discuss possible determinants and consequences of the existing communication structure.

Revenue-sharing contracts allow firms that are distant from their target markets to leverage sellers' local expertise. Although these contracts align incentives in operational decisions, they also introduce the potential for sellers to underreport revenues. We analyze film-level box office data from 7,309 Chinese cinemas and find that cinemas report significantly lower revenues for foreign films than for comparable domestic films, consistent with foreign producers being less able to monitor reported revenues due to geographic distance. The underreporting of foreign films is lower in cities with widespread mobile payments, in multi-unit cinemas, and when foreign films have more predictable revenues, suggesting institutional factors that increase detection likelihood can mitigate underreporting. Further tests indicate the lower reported box office revenues of foreign films is not due to government intervention. Our findings provide novel evidence of product-level misreporting under revenue-sharing contracts and offer insights on mitigating these risks in international markets. Data availability: Data are available via the sources specified in the paper. The authors greatly appreciate the data supplied by EntGroup (http://english.entgroup.com.cn/enbase.html) but are not able to share the data based on the agreement with Entgroup.