Does European Union policy making explain accounting choices? An empirical analysis of the effects of investigations by the Directorate General for Competition on accounting choices

The hypothesis that political costs caused by the regulatory process impact upon accounting has been tested extensively and has found considerable empirical support. However, most studies use data from the United States. Whether the conclusions carry over to different institutional settings is an open question. This study exploits the fact that, in the European Union, there exists a policy area—competition policy—in which the European Commission can act in a manner significantly less constrained than in most other policy areas, imposing substantial fines on companies found to be in infringement of European competition regulations. Companies investigated by the Commission’s Directorate General for Competition have strong incentives to deflect attention and keep a low profile. It is conjectured that such companies will use income-decreasing accruals in order not to appear to be making unjustified profits. The results confirm this conjecture.     

Connecting external knowledge usage and firm performance: An empirical analysis

Prior research suggests that firms create breakthrough innovations by using external knowledge, but it also underscores the difficulties firms face in acquiring and applying external knowledge. In this paper, we combine these insights to examine the conditions under which external knowledge usage will either enhance or erode firm performance. In particular, we argue that high external knowledge usage has a negative effect on performance when firms enter multiple new product markets, but a positive effect on performance when firms using external knowledge have higher absorptive capacity. We find general support for our hypotheses, which we test using patent citation data from the global integrated circuit manufacturing industry. Our findings have important implications for managers of firms making strategic decisions about their firms’ product portfolios and the degree to which they use external knowledge.     

Innovation capability and corporate growth: An empirical investigation in China

This study examines the antecedents of firm innovation capability in high technology firms in China and its effect on long-term corporate growth. It explores the growth-driven core competence of a firm by employing a knowledge-based view. The analysis of firm innovation capability indicates that firm innovation capability is related to long-term corporate growth. The results of this study support this link and the findings stress the importance of innovation intent and infrastructure to a firm's innovation capability.     

Empathic emotion and leadership performance: An empirical analysis across 38 countries

The purpose of our research is to examine the relationship between subordinate ratings of a target-leader's empathic emotion and boss ratings of performance of that target-leader. Furthermore, using hierarchical linear modeling, we assess whether the cultural background of the target-leader moderates this relationship. Our results show that leaders who are rated by their subordinates as engaging in behaviors that signal empathic emotion are perceived as better performers by their bosses. In addition, we found that the GLOBE societal culture dimension of power distance was a significant cross-level moderator of the relationship between empathic emotion and performance. Implications for leading in cross-cultural and multicultural contexts are discussed.     

Sourcing strategy of Belgian SMEs: empirical evidence for the accounting services

The primary objective of this paper is to examine the sourcing strategy for one business function (accounting services), by looking at the degree of outsourcing for each task of this function. Three research questions are addressed: (1) What sourcing strategy do SMEs use for accounting services? (2) What are the reasons? (3) Is there a link between sourcing strategy and company characteristics? The research design consisted of a postal survey sent out to 1200 managers of SMEs in Belgium. The main results showed that 53% use selective outsourcing, i.e. combining both an inhouse accountant with an accounting service provider. The results also showed that 35% use total insourcing and 12% prefer total outsourcing. Surprisingly, cost reduction is not the main reason for outsourcing. External expertise is the main reason for selectively outsourcing. SMEs select a total insourcing strategy because they want the accounting information at hand. Finally, larger SMEs decide for a total insourcing strategy and prefer to keep the accounting services internal. The conclusions show that future research should focus on the degree of outsourcing. The practical implication of this study is that accounting service providers should highlight their expertise and overcome the disadvantage of remote data analysis to attract more SME-customers.     

Team flexibility's relationship to staffing and performance in complex projects: An empirical analysis

We examine the role of flexibility in project team effectiveness. Specifically, we hypothesize that (1) it will mediate the relationship between staffing quality and effectiveness and (2) its relationship with team effectiveness will be moderated by project complexity, where more flexibility will be required when projects are complex. Hypotheses are tested using data collected from 60 cross-functional project teams. The results indicated that flexibility mediates the relationship between staffing quality and team performance (goal achievement and cohesion, but not project efficiency). Additionally, we find that two-dimensions of project complexity moderate the flexibility–performance relationship. Specifically, the more alternatives a team must consider, the stronger the negative relationship between flexibility and project efficiency is. The flexibility–cohesion relationship also was moderated, such that the relationship is more positive when the project is more ambiguous and more negative when the project team faces many alternatives. Implications for research and practice are discussed.     

Auditor independence, corporate governance and aggressive financial reporting: an empirical analysis

This paper seeks to provide empirical evidence on the efficacy of three important governance mechanisms (auditors, directors, and institutional shareholders) in constraining aggressive financial reporting, proxied by abnormal accruals. It also examines the effects of the Sarbanes–Oxley Act (SOX) on their efficacy. Using a sample of US firms audited by the Big 5 (4) auditors between 2000 and 2004, we document a positive relation between abnormal accruals (our proxy for financial reporting aggressiveness) and auditors’ economic dependence on their clients. Furthermore, we find that this relation is driven by firms with weak non-auditor governance mechanisms before and after the enactment of SOX. The results suggest that aggressive financial reporting occurs only when multiple governance mechanisms ‘fail’. More specifically, such type of reporting requires that a highly dependent auditor operates in a ‘poor’ governance setting. Thus, the paper underscores the importance of strong governance in constraining aggressive financial reporting. Moreover, our results suggest that governance regulation (such as SOX) is not a substitute for strong governance mechanisms and thus caution against the over reliance on SOX-type legislation in other parts of the world.     

Making sense of conflicting empirical findings: A meta-analytic review of the relationship between corporate environmental and financial performance

Despite the tremendous number of publications concerned with the relationship between corporate environmental performance (CEP) and corporate financial performance (CFP), inconsistent empirical findings persist and the overall picture remains vague. Drawing on a hybrid theoretical framework (combining the theoretical reasoning of the natural-resource-based view (NRBV) with instrumental stakeholder and slack resources arguments), we address the apparent lack of consensus by meta-analytically integrating the findings of 149 studies. We pay particular attention to two highly material issues: the direction of causality and the multidimensionality of the focal constructs. Meta-analytic results indicate that there is a positive and partially bidirectional relationship between CEP and CFP. In addition, our findings suggest that the relationship is stronger when the strategic approach underlying CEP is proactive rather than reactive. Furthermore, we reveal moderation effects of methodological artifacts, which may provide explanations for the inconsistency of the results of previous studies. Based on our findings, we discuss the implications and outline avenues for further research.     

Management performance: An empirical study of the manufacturing companies in Taiwan

This paper proposes a methodology to measure the management performance of the firms of an industry. The idea is to break down the very complicated concept of management into subjects such that the performance of each subject can be measured. The performances of all subjects are then aggregated to form an overall performance of management. The weights associated with the subjects which play a decisive role in aggregation are determined from a two-stage method. This method takes into account both the experience of the experts and the reality reflected by the data collected from the firms. Therefore, the weights generated are more acceptable to the firms. An example of the manufacturing firms in Taiwan illustrates how management is broken down into subjects and how their performances are aggregated. A regression analysis shows that management, in addition to capital and labor, makes a significant contribution to organizational performance. Although the discussion of this paper is confined to the manufacturing industry in Taiwan, the methodology can be applied to other industries and other countries.     

Environmental proactivity and business performance: an empirical analysis

This paper analyses the relationship between environmental proactivity and business performance on a sample of 186 industrial companies. This relationship is approached by studying a bundle of relationships between different dimensions or manifestations of environmental proactivity and different measures of business performance. The analysis in part supports the idea that environmental management can bring about competitive opportunities for companies, although it also reveals that some environmental practices produce negative effects. It is thus concluded that there is no one single response for the question of whether environmental proactivity has positive effects on business performance and that this relationship must be disaggregated into more specific and concrete relationships.     

Applying data envelopment analysis on accounting data to assess and optimize the efficiency of Greek local governments

The efficiency and effectiveness of local governments has become one of the main points of interest in public sector administration, as decision and policy making gradually move from the central to the local level. This paper introduces an efficiency analysis framework based on accrual accounting data obtained from the local governments’ financial statements. Data envelopment analysis is used to obtain efficiency estimates, which are analyzed through a second stage regression against a set of efficiency explanatory factors. Furthermore, the optimal reallocation of the municipalities’ inputs and outputs is explored to provide policy recommendations that a central government could implement in a budget reduction context. Detailed empirical results are presented from a panel data set of Greek municipalities over the period 2002–2009.     

Organizational emotional capability,product and process innovation,and firm performance: An empirical analysis

The concept of emotional capability is one of the competencies that a firm has which is vital for the daily life of the organization. However, the effect of emotional capability, involving the dynamics of encouragement, displaying freedom, playfulness, experiencing, reconciliation, and identification constructs on the firm innovativeness (i.e., product and process) is interestingly missing in the technology and innovation management (TIM) literature. In this study, by investigating 163 Turkish firms, the dynamics of encouragement and experiencing were found to have a positive association with both firm product and process innovativeness; and the dynamics of displaying freedom have a positive relationship with firm process innovativeness. We also demonstrate that the impact of emotional capability constructs on firm innovativeness is contingent upon environmental uncertainty. Specifically, we find that the influence of the dynamics of encouragement on firm product innovation increases with increased rate of environmental uncertainty. Interestingly, the relationship between the dynamics of experiencing and product innovation across low, medium, and high levels of environmental uncertainty is an ∩-shaped. And, the relationship between the dynamics of displaying freedom and product innovation across low, medium, and high levels of environmental uncertainty is a U-shaped. In addition, we show that a firm's emotional capability influences its financial and market performance via firm innovativeness. We discuss the theoretical and managerial implications of the study's findings.     

An empirical study on the relationship between perceived employability and employee performance

Despite the growing attention to employability in the era of job insecurity, there have been a limited number of empirical studies regarding the positive effect of employees’ perceived employability (PE) on performance. The purpose of this study is to examine the relationship between PE and three domains of employee performance: in-role, adaptive, and extra-role. This study also tests the moderating effect of the perceived quality of employment on these relationships. To test our hypotheses, we surveyed 334 employees and their 37 immediate supervisors working for an organization in South Korea. We utilized official performance ratings and supervisors’ ratings to measure the three domains of performance. The results show that PE is positively related to in-role, adaptive, and extra-role performance. An interaction between PE and the perceived quality of employment on extra-role performance is also evident. Implications for research and human resource development practices will be provided.     

Effects of data breaches from user-generated content: A corporate reputation analysis

A threat for a growing number of firms in various industries is the occurrence of different breaches of sensitive corporate data. These critical events represent vulnerability for firms' corporate reputations, whose multiple dimensions are affected by customers negative perceptions in various ways. Further, in the Industry 4.0 era, the redundancy of scandals on social media can exacerbate negative effects. This paper reports an investigation into the effects of data breaches on corporate reputation dimensions. In this context, the study conducted latent Dirichlet allocation analysis on social media user-generated content (UGC) for a sample of 35 firms in nine industries that suffered a data breach incident between 2013 and 2016. Incidents have been categorized into three categories: “intentional and internal,” “unintentional and internal,” and “intentional and external” data breaches. The aim of the study was to discover how reputational dimensions changed after these critical events and to identify the differences among the types of data breaches.Results reveal that after critical events, more reputational dimensions appear to be relevant. While before critical events, users typically discuss the “perceived quality” of a firm's offer, after all three types of data breaches, users also pay attention to “customer orientation” and “corporate performance” dimensions. Another key reputation dimension, especially after intentional and internal data breaches, is the “firm as employer,” particularly in the context of a lack of investment in training regarding these events.These findings provide key insights for academics and practitioners to understand large-scale data breaches effects and reputational drawbacks after such incidents.     

Antecedents and performance outcomes of global competence: An empirical investigation

We examine the role of commitment to supply chain management (CSCM) and information technology (IT) in the achievement of global competence (GC). Through an empirical examination of 667 manufacturing business units in the U.S., we confirm the importance of global competence using two objective measures of firm performance. We investigate the direct effects of CSCM and experience with IT on performance, in addition to their indirect effects through global competence. We show global competence to be linked directly to objective measures of sales, and indirectly to return on assets (ROA). Despite manufacturers’ hefty investments in IT, we find that experience with IT does not drive ROA directly, but only indirectly through global competence and sales.     

Efficiency analysis of university departments: An empirical study

Universities play an important role in the development of a country in this age of the knowledge economy. As government subsidies to universities have been reducing in recent years, the more efficient use of resources becomes an important issue for university administrators. This paper applies data envelopment analysis (DEA) to assess the relative efficiency of the academic departments at National Cheng Kung University in Taiwan. The outputs considered are total credit-hours, publications, and external grants; and the inputs utilized by the departments are personnel, operating expenses, and floor space. An assurance region is constructed by the top administrators of the university to confine the flexibility in selecting the virtual multipliers in DEA. Four groups of departments of similar characteristics are categorized via an efficiency decomposition and cluster analysis. The aggregate efficiency indicates whether the resources have been utilized efficiently by a department and the efficiency decomposition helps identify the weak areas where more effort should be devoted so that the efficiency of the department can be improved.     

An empirical multi-level analysis for achieving balance between incremental and radical innovations

An examination of 202 innovation projects in 42 firms revealed two approaches in how firms manage employees to explore new knowledge for radical innovations and to exploit existing knowledge for incremental innovations. The first is the system of organization-level management practices, whereby employees are recruited based primarily on prior work experience in other companies and developed interdepartmentally, and compensation is based primarily on joint performance without a specific innovation project in mind. The second is the system of team-level management practices, whereby employees are selected based mainly on overlapping knowledge with team members, and are trained and rewarded for a specific innovation project. Although both systems offer employees the necessary psychological safety for attaining radical innovations and the perspective-taking capability helpful for incremental innovations, each system is better for achieving one type of innovation than the other. The system of organization-level management practices better achieves radical innovations because it provides greater psychological safety, while the system of team-level management practices better achieves incremental innovations because it develops superior perspective-taking capability. Using both systems assists in incremental innovations but not radical innovations, because contradictory expectations are placed on the employees, diminishing psychological safety. The main implication of these findings is that companies should manage their employees differently depending on the type of innovation they wish to achieve.     

Innovation in family firms: an empirical analysis linking organizational and managerial innovation to corporate success

Family firms play a significant role in national economies worldwide, accounting e.g. for 85% of all enterprises in the OECD countries as well as for the majority of companies in Central Europe. Previous scholarly research on family firms has mostly focused on the question of how they differ from public corporations, describing family firms as being more conservative, less risk-raking, or reluctant to grow—in sum, as being less entrepreneurial than their non-family counterparts. Similarly, the existing literature often criticizes the lack of innovation in family firms. But since innovation has long been discovered as one of the key drivers to company success, it is surprising that its role in family firms has been mostly neglected in existing academic research so far. The aim of this article is therefore to study the role of (managerial and organizational) innovation in family firms compared to non-family firms on the basis of an empirical survey of 533 companies from Finland, using structural equation modelling (MPlus) for the statistical analyses.