Knowledge that Transforms

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This study examines the under-researched equity sales function and analyses how equity brokers use accounting to generate individualized, contrarian investment recommendations to serve fund manager clients in a highly competitive market for investment advice. This study reports on the brokers’ practices using an ethnographically inspired study of an equity sales desk and follows the lifecycle of a brokers’ investment case referred to herein as “Indumine” (pseudonym). The analysis shows how the brokers used accounting to develop the case together with fund manager clients and against the analyst consensus – a practice the brokers referred to as “reverse brokering”. Unlike previous analyses of how accounting influences investment decisions by being stable and objective, the brokers in our analysis continually added and abandoned accounting items in order to maintain a distance from consensus, remain subjective and interesting to clients, and achieve recognition. To make theoretical sense of such a use of accounting, this paper puts forth a consumption perspective of accounting. The argument is that the relevance of the accounting used for the brokers’ investment recommendations is consumed when the information becomes factual and impersonal, and no longer sustains the brokers’ contrarian view of the share; the challenge for the brokers is to sustain the economic potential of the case despite the temporary facticity of the accounting information. The paper proposes that this form of accounting consumption constitutes an elementary form of accounting use, operating in the shadow of more formal information infrastructure.

This study investigates how control features influence employees’ perceptions of controls and, subsequently, their reporting behaviors. Specifically, I examine whether implementing a more centralized versus decentralized monitoring control influences employees’ perceptions of whether the control will detect misreported performance. In an experiment that holds the true detection rate constant, I find participants perceive a relatively decentralized control more likely to detect misreporting than a centralized control. Because decisions about monitoring controls and compensation systems are interrelated (O’Donnell 2000) and made contemporaneously (Brenner and Ambos 2013), I also examine whether compensation interdependence influences the effect that control centralization has on misreporting. Prior research documents aggressive reporting behavior increases as compensation becomes more interdependent (Sutter 2009). This suggests that larger increases in perceived detection rates are required to reduce dishonest reporting as compensation interdependency increases. Therefore, for a given level of perceived detection resulting from control centralization, employees are more likely to misreport when compensation is more interdependent than independent. Consistent with this reasoning, I find that a more decentralized control reduces dishonest reporting when compensation interdependence is low. However, when compensation interdependence is high, the effect of control centralization on dishonest reporting is muted. These results suggest that a complex relationship exists between control centralization and compensation interdependence. As such, this study has important implications for academics, control system designers, and compensation system designers.

We analyse the institutional dynamics surrounding the establishment of independent audit oversight in Germany from 1997 to 2016. Complementing prior works, which have focused on countries where the global demand for independent regulation coincides with the domestic erosion of public trust in professional self-regulation, we investigate regulatory change in a context featuring strong trust in the accounting profession. To analyse the accounting establishment’s response to expanding global standards of accounting regulation and the escalating resistance of small accounting firms, as orchestrated by one individual, we mobilize a Bourdieusian field perspective and the literature on institutional entrepreneurship. By demonstrating how intra-professional conflict has increasingly eroded the establishment’s capital to reproduce its hegemonic field position and keep the regulator at distance, our case provides a counterpoint to prior research, which suggests that oversight is mainly the product of negotiations between a unified profession and the regulatory authority. Examining a rare instance of individual entrepreneurship also enables us to engage in a theory-testing process on the explanatory power of institutional ambiguities—the subjectively perceived ruptures and contradictions within established social arrangements—for agency. Our findings suggest that ongoing encounters with institutional ambiguities result in varying disposition to activism. In this way, while acknowledging agency as a cause of field reproduction and change, our analysis shifts attention towards the relational, temporal, and transformational institutional dynamics that constitute distinct modes of agency. By identifying empirical residuals that seem to escape theorization, we also reveal the limits of institutional theorizing.

Following the theoretical innovations of complementarity theory, management control studies have investigated interdependencies between different management control practices. In this paper, we compare the two dominant statistical specifications to test for the presence of an interdependency. We show theoretically how the power of the demand and the performance specification varies with the level of optimality in the sample and how those specifications are vulnerable to correlated omitted variable bias. Our simulation results reveal that the demand specification is more robust to variations in optimality and correlated omitted variables than the performance specification. We use these results to formulate recommendations for future research into management control interdependencies.

This study conducts two experiments to examine how investors’ judgments differ when they read a press release using either a mobile device or a computer. Results show that when investors use a mobile device, information related to a specific headline (mentioning a specific part of the news like “net income” or “revenue”) influences their investment judgments more than when investors use a computer. This effect is robust to specific headlines that focus on either positive or negative information. In contrast, investors’ judgments do not differ when they use a mobile device compared to a computer and the headline is general (using the broad term “results”). We replicate our findings in a second experiment and provide evidence that the observed effect occurs because investors who use their mobile device are in a more distracted frame of mind, which in turn increases the influence of prominent information. Our results suggest that managers’ presentation choices may have a greater influence on investors as they increasingly rely on mobile devices to research and execute investment decisions.

This study investigates the motivational effect of relative performance information (RPI) under working environments with or without surveillance, i.e., a behavioral control. We predict that surveillance negatively affects the performance-increasing effect of providing RPI and conduct a laboratory experiment to test this prediction. We manipulate surveillance by having participants work either with or without video surveillance. Consistent with our prediction, we find that the motivational effect of RPI diminishes if surveillance is present. Furthermore, we investigate the underlying mechanisms that drive our results. In particular, we find that surveillance increases perceived behavior control, eliciting individuals to perceive RPI more as a control mechanism. Our findings have important implications for firms using RPI and reveal the need to further investigate the effectiveness of incentive systems under behavior controls.

It is well known that both management and professional work in areas such as health and aged care rely upon division of individuals into categories of, for example, diagnoses or costs and revenues. The present paper turns this around and asks: what happens if individuality, the indivisible wholeness of the person, is taken seriously in such practices? If every human being is interpreted as unique and special, and their wholeness is recognised in the relationship between professionals and an individual receiving care? The paper analyses two rival programmes – those of efficiency and individuality – and their operationalisation in Swedish aged care, and show how these programmes and corresponding technologies are sources of dissension that can be used to problematise how care should be conducted. However, such dissension also opens up spaces of freedom, which allow care practitioners to conduct care differently.

Many audit firms use client relationship management tools (e.g., client satisfaction surveys); however, overemphasizing relationship quality potentially makes auditors susceptible to client influence. Audit seniors, the main point of contact with clients, could be most vulnerable. In an experiment, we manipulate the presence of a potential client persuasion attempt in response to auditor inquiry (expressions of high confidence) and an audit firm’s emphasis on relationship quality (desire to achieve high client satisfaction ratings for the current year’s audit). We examine how these variables jointly influence the extent to which audit seniors infer persuasion from client explanations and, importantly, whether that inference is reflected in their actions. We find that auditors infer to an incrementally greater extent that client persuasion is present when they encounter high confidence when relationship quality is emphasized; however, they do not respond by collecting more relevant audit evidence under these conditions. Our findings suggest that auditors do not pursue audit evidence that could reduce their reliance on client-provided information and, thereby, limit client influence, even when they infer client persuasion to a greater extent.