Behavioral Research in Accounting
Published annually by the Accounting, Behavior and Organizations Section of the AAA

1998, Volume 10 Supplement


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Volume 10, 1998 of Behavioral Research in Accounting (BRIA) (Supplement) contains selected research papers that were presented at the Fourth Annual American Accounting Association (AAA) Accounting, Behavior and Organization (ABO) Research Conference held in Pittsburgh, Pennsylvania, Westin William Penn Hotel, May 8-10, 1997. The decision to publish these papers is based upon feedback received from referees, discussants and participants at the conference.

The papers in the Supplement are grouped into seven subject areas: evolution of behavioral approaches in accounting research, management control, experimental economics, auditing, and international accounting among others. These papers utilize various research methodologies: experiments, surveys, in-depth interviews, protocol analysis, field studies and archival research. They represent the various research methods currently used by behavioral accounting researchers. As such, these papers provide a forum for discussion and future research in their respective subject areas.

A number of individuals have contributed to the success of the conference. Publication of this Supplement would not have been possible without the support of W. Steve Albrecht, President of AAA (1997/98) and the AAA Executive Committee. I am particularly indebted to Steve, the AAA Executive Committee members, and the ABO Board of Trustees (Andrew D. Bailey, Mary S. Stone and Jan R. Williams) for making the necessary financial arrangement with the ABO Section to publish the Supplement. Mr. Craig Polhemus, AAA Executive Director, provided generous assistance for the 1997 ABO Research Conference and the publication of this Supplement. His administrative staff, Debbie Gardner, Jim De La, Beverly Harrelson, Roland LaTulip and Mary Cole; and the AAA Meeting Coordinators, Dee Strathan and Debbie Gouwens, have provided technical and logistic support both for the conference and the Supplement. Joe Schultz has been instrumental in facilitating the completion of the conference. The ABO Board of Officers has supported and authorized the conference and the Supplement.

I am particularly grateful to members of the ABO Section and other AAA sections for their support and involvement at the conference as paper presenters, discussants, moderators and reviewers. I would like to thank the manuscript referees for their assistance in reviewing the papers on a timely basis, and am including the names of all referees who reviewed papers both for the conference and the Supplement.

I have benefited from my close working relationship with Jacob G. Birnberg and his experience as Editor of BRIA during 1995/1997. I am indebted to his suggestions for matching reviewers with their subject areas and grouping papers by topical areas for both the conference and the Supplement. Eileen Stommes provided editorial assistance in the preparation of the Supplement.

Duquesne University has assisted my efforts in organizing the conference. I would especially like to thank Thomas J. Murrin, Dean of the Palumbo School of Business; and Kenneth L. Paige, Coordinator of Accounting Program for their support of the project. Linda Cuda and Chris Koenig have provided secretarial support. My graduate assistants, Dilum Wijekon and Janna Miller, have been respectively involved in both the conference and the Supplement. I am grateful to them and to my colleagues in the ABO Section for their support of my endeavors. Their unfailing support made the timely completion of this project possible. Seleshi Sisaye, Duquesne University Editor, BRIA Supplement-Volume 10, 1998

Seleshi Sisaye, Duquesne University
Editor, BRIA Supplement-Volume 10, 1998

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The Ascendancy of the Behavioral Paradigm in Accounting: The Last 20 Years

Thomas R. Dyckman, Cornell University

The purpose of this paper is to trace the growth of the behavioral paradigm in accounting. By examining the change in several measurable variables, I show that there has been a substantial increase in the impact of this paradigm over the period studied. This growth is documented by increases not only in the number of faculty selecting the behavioral designation to identify their area of interest, but also by the percentage who self identify. The increasing impact of the behavioral paradigm is also supported by an increase in the number and proportion of the articles using this approach that appear in the more prestigious accounting journals. I also document a series of events that have occurred over a more extended period of time that supported and contributed to the rise of behavioral science in the activities of accounting scholars. Finally, I take a look to the future.

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An Overview of the Social and Behavioral Sciences Approaches 
in Management Control Research

Seleshi Sisaye, Duquense University

This section of the supplement contains four papers that discuss social and behavioral sciences applications in accounting and control research. The authors apply macro perspectives at the group and organizational levels. This paper provides an overview of the differing approaches/perspectives used by the authors and describes their implications for future research on management control systems. The paper suggests that using multidisciplinary approaches in social and behavioral sciences would enrich future research on accounting and control systems in complex organizations.

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Some Reflections on the Evolution 
of Organizational Control

Jacob G. Birnberg, University of Pittsburgh

The focus of control systems has shifted from the problem of controlling the individual/task to the problem of controlling the organization. This change is due to the dynamic nature of the environment within which organizations now exist. This paper discusses the impact of that change on the organization’s control system. The primary impact has been on the role of feedback in the system. Feedback no longer serves to facilitate the control system’s convergence to equilibrium. In a dynamic setting, feedback is the vehicle through which “adaptive controls” and “playfulness” facilitate change and alter the nature of controls.

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Contingency Theory, Management Control Systems
and Firm Outcomes: Past Results and Future Directions

Joseph G. Fisher, Indiana University

This paper examines the link between contingency theory and management control systems. Contingency theory states that the design and use of control systems is dependent upon the context of the organizational setting. A better match between the control system to the contingency variable is hypothesized to result in increased organizational performance. This paper identifies contingent control variables, defines the boundaries of control systems, and categorizes prior work by the analysis complexity. Even though this research stream has provided useful insights, many of the results are tentative and less than definitive. This paper concludes by proposing ways to strengthen contingency theory results.

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Accounting and Control as Solutions to Technical Problems, 
Political Exchanges and Forms of Social Discourse: 
The Importance of Substantive Domain

Mark W. Dirsmith, Pennsylvania State University

The purpose of this paper is to offer suggestions for future research in accounting and control. It proceeds by first describing the three domains that comprise research—the conceptual, research methods and substantive domains—and suggests that our understanding of accounting and control may perhaps be best extended by intensively focusing on the substantive domain, or social/organizational setting of interest, and then drawing in relevant theoretical frameworks and methods. The paper then discusses the multiple roles of accounting and control systems as technical solutions to problems, political exchanges and forms of social discourse, and the research methods that may be used to study these roles.

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Cost Management and Management Control 
in Health Care Organizations: Research Opportunities

John H. Evans III, University of Pittsburgh

Healthcare organizations today face a myriad of challenges as they attempt to adapt to demands for improved quality and reduced cost. Their responses to these pressures provide accounting, behavior and organization (ABO) researchers an excellent laboratory in which to examine changes that also confront many other service organizations. Distinctive features that make this laboratory an appealing one are the existence of systematic, large-scale databases, the special role of teams and physicians and the current state of cost accounting information. Current empirical research in this area is described and categorized with an eye toward future research opportunities.

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Using an Experimental Economics Approach 
in Behavioral Accounting Research

Donald V. Moser, University of Pittsburgh

The paper begins with a brief comparison of the research perspectives of experimental economists vs. those of most behavioral accountants who conduct experiments. This is followed by a detailed description of two specific studies. The first study provides an example of the experimental economics approach, while the second study provides an example of the integration of this approach into a behavioral accounting study. These studies are used to illustrate the standard techniques and procedures used in experimental economics and compare them to those used in conventional behavioral accounting experiments. The potential costs and benefits of integrating aspects of the experimental economics approach into behavioral accounting experiments are discussed. The paper concludes with a discussion of how such an integrative approach could significantly increase the impact of behavioral accounting experiments.

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Bargaining Strategy and Accounting Information
About Opponents’ Payoffs: Bargaining in a Hall of Mirrors

Joan L. Luft and Susan F. Haka 
Michigan State University 
Brian Ballou, Auburn University

Although accounting information is widely acknowledged to provide the basis for many contractual agreements, the impact of accounting information characteristics on bargaining behavior has received little research attention. The results reported in this manuscript demonstrate that the amount of uncertainty inherent in accounting information signals can impact bargaining behavior. In particular, offers and counteroffers observed in a bilateral bargaining setting, where accounting-based information about an opponent’s payoffs was less certain, are consistent with bargainers acting and opponents responding as if offers and counteroffers were strategic rather than informational. In more certain settings, however, bargainers were more likely to use offers and counteroffers to reveal reservation price information and opponents were more likely to believe bargainers’ offers revealed relevant information about bargainers’ preferences. We hypothesize that bargainers’ reflections (as in a hall of mirrors) of each other’s cognitions are impacted by the uncertainty of the signals generated by the accounting information system.

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Anchoring Effects Associated With Recommendations 
From Expert Decision Aids: An Experimental Analysis

Tamara K. Kowalczyk, University of Nevada, Las Vegas 
Christopher J. Wolfe, Texas A&M University

This study investigates the effect of recommendations from an expert system on the judgment behavior of system users in an auditing task. Specifically, two experiments were conducted to determine whether the provision of such recommendations is associated with anchoring effects among users. “Anchoring” is a term used to describe a judgment bias that occurs when individuals cannot ignore certain knowledge when processing information in decision making. In each experiment, auditing students used an expert system that assisted in the evaluation of whether there existed substantial doubt about a company’s ability to continue as a going concern. We compared the assessments of users provided recommendations from the system to those not provided recommendations. The results provide evidence that anchoring effects can occur with the provision of recommendations from the expert decision aid. An important implication of these results is that anchoring on the advice of an expert decision aid can result in improper attention given to audit evidence that is inconsistent with the recommendation. Results from this and similar studies that examine the implications of expert system use on decision behavior can be useful in the development and implementation of effective intelligent decision aids.

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Influencing Decision Aid Reliance 
Through Involvement in Information Choice

Stacey M. Whitecotton, Arizona State University 
Stephen A. Butler, University of Oklahoma

Prior research suggests that accounting decision makers are often unwilling to rely on decision aids, limiting their intended effectiveness. This study examines involvement in the aid’s development as a mechanism for decreasing decision-makers’ resistance to decision aids. We investigate whether the act of choosing the information for the decision aid increases decision aid reliance, and then examine the resulting impact of involvement on performance. As expected, decision makers were more willing to rely on a decision aid based on information they had selected than were decision makers without this type of involvement. However, the information chosen resulted in decision aids with lower predictive accuracy than the optimal decision aid. Although there were no significant differences in absolute performance related to information choice, there were significant performance improvements relative to the quality of the decision aid. These results highlight the importance of evaluating both decision aid reliance and predictive validity in determining decision aid success.

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Sources of Process Gain and Loss 
From Group Interaction in Performance 
of Analytical Procedures

Jean C. Bedard, Northeastern University 
Stanley F. Biggs, University of Connecticut 
James J. Maroney, Northeastern University

Many business tasks are performed by people interacting in groups. While research on the effects of group interaction on task performance has been called for, few such studies have been done. Most studies conducted in audit settings stress that group interaction should result in performance gain. However, psychology literature also indicates that group interaction could result in reduced performance as a result of process loss. This paper explores decision processes of interacting audit groups and individual auditors when conducting analytical procedures. A model of group performance adapted from Steiner (1972) (Steiner's model) helps frame group process gain and loss issues. Decision process data are gathered from groups of auditors using think-aloud verbal protocols. Group decision processes and performance are compared to those of individual auditors from a prior study. Results indicate that groups exhibited some process gain (e.g., from knowledge pooling), which contributed to improved performance. However, process loss caused several groups to fail to select a correct hypothesis that had been considered, thereby preventing them from achieving their full potential. Specific sources of process gain and loss contributing to differential group performance are discussed, along with implications for audit practice regarding maximizing process gain and reducing process loss.

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The Effect of CEO Disclosure Beliefs 
on the Volume of Disclosure 
About Corporate Earnings and Strategy

A. Jane Craighead, Concordia University and McGill University 
Jon Hartwick, McGill University

This study investigates the association between managerial disclosure beliefs and firms’ disclosure activities. It adopts a cognitive perspective that posits beliefs underlie the performance of behaviors (Fishbein and Ajzen 1975); hence, managerial disclosure beliefs will be related to a firm’s voluntary disclosure practices. Managerial disclosure beliefs were measured through a survey of 68 CEOs of Canadian public companies. Firm disclosures were measured by the volume of disclosures about corporate earnings performance and changes in future corporate strategy contained in the Canadian Business and Current Affairs database.

The results show that managerial disclosure beliefs predict more than 20 percent of the variance in the volume of both earnings disclosures and strategy disclosures. Specifically, we found that firms with CEOs who believe that disclosure has certain benefits (for example, reductions in the firm’s cost of raising capital, or investors’ costs of gathering information) disclose more than other firms. Further, the CEOs of high disclosure firms believe that the market makes significant use of multiple sources of information, such as analysts’ forecasts of future earnings and information about corporate strategy, in valuing the firm. On the other hand, low disclosure firms were found to have CEOs who believe that the market is fixated on earnings per share data. These results indicate the importance of managerial disclosure beliefs in explaining why firms disclose differently on a voluntary basis.

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The Role of Peer Relationships 
During CPA Firm Mergers

Philip H. Siegel, Long Island University 
Alan Reinstein, Wayne State University 
Khondkar E. Karim, Long Island University 
John T. Rigsby, Mississippi State University

This paper analyzes peer relationships in work settings by examining 16 peer relationships in a southwestern city shortly after the merger of two international accounting firms. We conducted a field study to examine why individuals form and keep peer relationships within the context of organizational and task uncertainty created by a merger. We found the functions performed by peer relationships were almost exclusively concentrated in the psychosocial area during the merger. The utilization of peer relationships was spread broadly across the firm, irrespective of education, experience or organizational level. The formation and maintenance of peer relationships appears to be an important reaction to the uncertainty and learning requirements imposed by the merger process.

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