Research seminars

Convergent Creativity and Management Control Systems: Managing Stylistic Innovation in Fashion Companies

Accounting & Management Control

Speaker: Angelo Ditillo
Università Bocconi

19 December 2012 - HEC Campus, salle T004 - From 2:00 pm to 4:00 pm


The empirical findings of this study indicate that management control systems are deeply embedded in the work environment of creative people and play a significant role in the creative teams directed at developing new products characterized by stylistic innovation. Yet, they do not address traditional goal divergence concerns but rather activate dialogues around meanings to define, negotiate, and legitimize the objectives that emerge during creation. This purpose is achieved through mechanisms that inspire (inspirational controls) these dialogues and mechanisms that configure (directional controls) the way they happen. Our research is based on a multi-case research design structured around an in-depth case study where the main traits of these systems are identified, followed up by five additional cases that reinforce, reshape, and enrich the findings. The study suggests that creativity and control do not have contradictory purposes and both are deeply integrated in organizations competing on creativity.

Director Independence and Insider Trading

Accounting & Management Control

Indiana University

30 November 2012 - HEC Campus, salle T004 - From 2:00 pm to 4:00 pm


While prior work establishes criteria for assessing director independence by scrutinizing outside directors’ professional and social connections, we examine the conditions under which outside directors’ trading and ratification decisions are incrementally useful in assessing their independence. Because crises test the independence of boards, we investigate the CEO replacement decision in firms caught intentionally misreporting earnings. We predict and find that outside directors’ selling that emulates selling by the CEO and inside directors makes them less willing to replace the CEO. Our findings derive from opportunistic rather than routine selling, and from collusive selling involving inside and outside board members rather than from selling by outside directors alone. We also predict and find that outside directors who ratify one or more value-destroying mergers in the misreporting period are less effective monitors. These results are robust to alternative measurements of opportunistic selling and to a comprehensive set of controls for the CEO replacement decision

Accounting Choices under IFRS and their Effect on Over-investment in Capital Expenditures

Speaker: Professor Mohamad MAZBOUDI
American University of Beirut

23 November 2012 - Room T004 - From 2.00 pm to 4.00 pm

IFRS allows firms to choose between fair-value accounting and historical cost accounting with impairment testing for property, plant and equipment (PPE). This study examines the effect of firms’ accounting choices for this group of non-financial assets on over-investment after IFRS mandatory adoption in the European Union (EU). My results indicate that over-investment in PPE (or capital expenditures) is lower following IFRS adoption among EU firms that used historical cost accounting with impairment testing in the post-IFRS period, consistent with EU firms having more timely loss recognition for PPE under IFRS strict impairment rules. In my analysis of United Kingdom (UK) firms, I find that most UK firms elected to use historical cost accounting with impairment testing for PPE after IFRS mandatory adoption. I also find that UK firms that previously used fair-value accounting under UK GAAP and then switched to historical cost accounting with impairment testing under IFRS exhibit greater reductions in over-investment relative to other EU firms that used historical cost accounting with impairment testing prior to IFRS adoption. Additional analysis suggests that the reductions in over-investment after IFRS mandatory adoption are greater as the severity of agency conflicts increases, consistent with outside shareholders demanding timely loss recognition as a means of addressing agency conflicts with managers.

INSTITUTIONAL LOGICS, PERFORMANCE FEEDBACK, AND THE ADOPTION OF CORPORATE GOVERNANCE PRACTICES

Speaker: TIM ROWLEY
UNIVERSITY OF TORONTO

23 November 2012 - SALLE DU CONSEIL - From 1.30 pm to 3.00 pm

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Accounting Choices under IFRS and their Effect on Over-investment in Capital Expenditures

Speaker: Professeur Mohamad MAZBOUDI
American University of Beirut

23 November 2012 - Salle T004 - From 14h00 to 16h00

Error management in audit firms: Error climate, type and originator

Accounting & Management Control

Speaker: Steven SALTERIO
Professor , Queen's University, Canada

21 September 2012 - Campus HEC, Room T027 - From 2:00 pm to 4:00 pm


Audit standard setters and regulators are increasingly focusing on the management context within which the audit firm conducts the audit for its effects on audit quality. We examine a key, but little understood facet of organizational life in audit firms, how audit staff who discover and report errors in audit files are routinely treated in response to such reporting such errors. This construct, denoted as audit office error management climate, can be characterized on a continuum between a relatively “blame” oriented climate to a relatively more “open” climate. The former is one where errors are not tolerated and those reporting or committing errors are punished whereas the latter characterizes error commitment as a normal, albeit unfortunate aspect of organizational life, where the error discovery is used an opportunity for the organization to learn and without sanctions being imposed on the originator as long as similar errors are not repeated. We examine audit office error-management climate in the context of audit specific contextual factors that might affect the decision to report the discovered errors: audit error type (conceptual/mechanical) and who committed the error (the individual who discovered it or a peer). We find an overall main effect for office error-management climate however; error management climate interacts as predicted with these contextual factors (error type and originator). Specifically, an open error-management climate results in an increase in the reporting of mechanical errors and an increase in reporting of peer errors versus a blame climate. Our findings suggest that standard setters and regulators need to understand their standards and inspections can affect the nature of audit firm error management climates and how the differences in such climates can affect audit quality by encouraging or suppressing the reporting by staff of errors in working paper files. Further, audit firm management needs understand how what may appear to be innocuous differences in management style at the individual audit office can affect audit quality by considering how individual audit management practices at the local level can defeat formal policies that reflect a desire for an open error management climate at the firm.

Error management in audit firms: Error climate, type and originator

Speaker: Professor Steven SALTERIO
Queen's University, Canada

21 September 2012 - Salle T027 - From 14h00 to 16h00

Audit standard setters and regulators are increasingly focusing on the management context within which the audit firm conducts the audit for its effects on audit quality. We examine a key, but little understood facet of organizational life in audit firms, how audit staff who discover and report errors in audit files are routinely treated in response to such reporting such errors. This construct, denoted as audit office error management climate, can be characterized on a continuum between a relatively “blame” oriented climate to a relatively more “open” climate. The former is one where errors are not tolerated and those reporting or committing errors are punished whereas the latter characterizes error commitment as a normal, albeit unfortunate aspect of organizational life, where the error discovery is used an opportunity for the organization to learn and without sanctions being imposed on the originator as long as similar errors are not repeated. We examine audit office error-management climate in the context of audit specific contextual factors that might affect the decision to report the discovered errors: audit error type (conceptual/mechanical) and who committed the error (the individual who discovered it or a peer). We find an overall main effect for office error-management climate however; error management climate interacts as predicted with these contextual factors (error type and originator). Specifically, an open error-management climate results in an increase in the reporting of mechanical errors and an increase in reporting of peer errors versus a blame climate. Our findings suggest that standard setters and regulators need to understand their standards and inspections can affect the nature of audit firm error management climates and how the differences in such climates can affect audit quality by encouraging or suppressing the reporting by staff of errors in working paper files. Further, audit firm management needs understand how what may appear to be innocuous differences in management style at the individual audit office can affect audit quality by considering how individual audit management practices at the local level can defeat formal policies that reflect a desire for an open error management climate at the firm.

Error management in audit firms: Error climate, type and originator

Speaker: Professor Steven SALTERIO
Queen's University, Canada

21 September 2012 - Room T027 - From 2.00 to 4.00

Audit standard setters and regulators are increasingly focusing on the management context within which the audit firm conducts the audit for its effects on audit quality. We examine a key, but little understood facet of organizational life in audit firms, how audit staff who discover and report errors in audit files are routinely treated in response to such reporting such errors. This construct, denoted as audit office error management climate, can be characterized on a continuum between a relatively “blame” oriented climate to a relatively more “open” climate. The former is one where errors are not tolerated and those reporting or committing errors are punished whereas the latter characterizes error commitment as a normal, albeit unfortunate aspect of organizational life, where the error discovery is used an opportunity for the organization to learn and without sanctions being imposed on the originator as long as similar errors are not repeated. We examine audit office error-management climate in the context of audit specific contextual factors that might affect the decision to report the discovered errors: audit error type (conceptual/mechanical) and who committed the error (the individual who discovered it or a peer). We find an overall main effect for office error-management climate however; error management climate interacts as predicted with these contextual factors (error type and originator). Specifically, an open error-management climate results in an increase in the reporting of mechanical errors and an increase in reporting of peer errors versus a blame climate. Our findings suggest that standard setters and regulators need to understand their standards and inspections can affect the nature of audit firm error management climates and how the differences in such climates can affect audit quality by encouraging or suppressing the reporting by staff of errors in working paper files. Further, audit firm management needs understand how what may appear to be innocuous differences in management style at the individual audit office can affect audit quality by considering how individual audit management practices at the local level can defeat formal policies that reflect a desire for an open error management climate at the firm.

Error management in audit firms: Error climate, type and originator

Accounting & Management Control

Queen's Univerity, Canada

21 September 2012 - HEC campus, salle T027 - From 2:00 pm to 4:00 pm


Audit standard setters and regulators are increasingly focusing on the management context within which the audit firm conducts the audit for its effects on audit quality. We examine a key, but little understood facet of organizational life in audit firms, how audit staff who discover and report errors in audit files are routinely treated in response to such reporting such errors. This construct, denoted as audit office error management climate, can be characterized on a continuum between a relatively “blame” oriented climate to a relatively more “open” climate. The former is one where errors are not tolerated and those reporting or committing errors are punished whereas the latter characterizes error commitment as a normal, albeit unfortunate aspect of organizational life, where the error discovery is used an opportunity for the organization to learn and without sanctions being imposed on the originator as long as similar errors are not repeated. We examine audit office error-management climate in the context of audit specific contextual factors that might affect the decision to report the discovered errors: audit error type (conceptual/mechanical) and who committed the error (the individual who discovered it or a peer). We find an overall main effect for office error-management climate however; error management climate interacts as predicted with these contextual factors (error type and originator). Specifically, an open error-management climate results in an increase in the reporting of mechanical errors and an increase in reporting of peer errors versus a blame climate. Our findings suggest that standard setters and regulators need to understand their standards and inspections can affect the nature of audit firm error management climates and how the differences in such climates can affect audit quality by encouraging or suppressing the reporting by staff of errors in working paper files. Further, audit firm management needs understand how what may appear to be innocuous differences in management style at the individual audit office can affect audit quality by considering how individual audit management practices at the local level can defeat formal policies that reflect a desire for an open error management climate at the firm.

Compensatory Consumption

Speaker: Derek D. Rucker
Associate Professor, Kellogg School of Management, Northwestern University, Illinois

28 June 2012 - HEC Paris Room H301 - From 13:00 to 14:30

Past research has demonstrated that consumption is often sought after or engaged in for reasons beyond the functional utility products provide. This talk focuses on how consumption is used to mitigate or offset psychological threat, a phenomenon known as compensatory consumption. New empirical work is presented that examines how consumption is used differently in anticipation of possible threat versus in the heat of experienced threat. In doing so, a first thrust is provided in understanding when consumption preferences and behaviors are motivated by symbolic self-completion versus an escape from self-awareness. Important directions for future research in the area of compensatory consumption are also discussed.

The Evolution of Accountancy as a Global Profession: An Historical Analysis of Profession/State Relationships

Speaker: C. Richard BAKER
Adelphi University, New York

22 June 2012 - MBA salle 04 - From 14.00 to 16.00

In this paper the evolution of accountancy as a global profession is examined through a comparative historical analysis of the development of statutory auditing in the United Kingdom, France and Germany. While it is now evident that a global accountancy profession has developed in response to the growth of global capitalism, a historical analysis of the evolution of the accountancy profession indicates that this evolution has not been smooth or constant, and that nation states have played a significant role in the development of the profession. While the legal requirement for external audits of company financial statements, which found its inception in the mid-19th century, provided an impetus for the growth of an accountancy profession, inertial factors arising from differences in the historical regulation of professional activity led to distinctions in the role and status of the accountancy profession. In effect, it is only in recent years that there have been significant efforts to harmonize the regulatory structures for the accountancy profession on an international basis, and, moreover, it can be seen that these international regulatory efforts have been focused almost entirely on what is referred to as “statutory auditing”. The primary argument of this paper is that international harmonization of regulation of the accountancy profession will be difficult to achieve as long as there continues to be differences in the definition of the purpose and objectives of regulating corporate activity and what the role of statutory auditing is within that regulation.

The Evolution of Accountancy as a Global Profession: An Historical Analysis of Profession/State Relationships

Speaker: C. Richard BAKER
Adelphi University, New York

22 June 2012 - MBA room 04 - From 2:00pm to 4:00pm

In this paper the evolution of accountancy as a global profession is examined through a comparative historical analysis of the development of statutory auditing in the United Kingdom, France and Germany. While it is now evident that a global accountancy profession has developed in response to the growth of global capitalism, a historical analysis of the evolution of the accountancy profession indicates that this evolution has not been smooth or constant, and that nation states have played a significant role in the development of the profession. While the legal requirement for external audits of company financial statements, which found its inception in the mid-19th century, provided an impetus for the growth of an accountancy profession, inertial factors arising from differences in the historical regulation of professional activity led to distinctions in the role and status of the accountancy profession. In effect, it is only in recent years that there have been significant efforts to harmonize the regulatory structures for the accountancy profession on an international basis, and, moreover, it can be seen that these international regulatory efforts have been focused almost entirely on what is referred to as “statutory auditing”. The primary argument of this paper is that international harmonization of regulation of the accountancy profession will be difficult to achieve as long as there continues to be differences in the definition of the purpose and objectives of regulating corporate activity and what the role of statutory auditing is within that regulation.

The Chronoprogram and Socio-Economic Complements – Capital budgeting in motorway construction.

Speaker: Jan Birkelund Mouritsen
Copenhagen Business School

24 May 2012 - Salle H022 - From 14h00 to 16h00

The Chronoprogram and Socio-Economic Complements – Capital budgeting in motorway construction.

Speaker: Jan Birkelund Mouritsen
Copenhagen Business School

24 May 2012 - Room H022 - From 2:00pm to 4:00pm

This study analyses how a mediating instrument called the Chronoprogram is involved in mediating ‘matters of concern’ in a motorway construction project. Through this lens capital budgeting investments are not only bundles of technically complementary assets where one investment increases the value of another. They also are bundles of socio- economic complements consisting of ‘non-causal investments’ that are outside the motorway object but necessary for the motorway project since they pay attention to the multiplicity of entities that seek to capitalise from the motorway. The study shows that capital budgeting for megaprojects, such as the Italian Apennine motorway “Variante di Valico”, involves managing socio-economic concerns and that the Chronoprogram helps actors to find the politics that makes the motorway a project.

Keywords: capital budgeting, socio-economic complementarity, actor network theory, Chronoprogram, construction industry.

Potential Actions Highly-Incentivized Client Managers Can Take to Secure Favorable Audit Judgments

Speaker: William F. Messier, Jr.
University of Nevada, Las Vegas

15 May 2012 - Room H004 - From 10:00am to 12:00noon

Given guidance that auditors should consider management incentives when determining audit
adjustments (e.g., SEC [1999, SAB 99]; Levitt [1998]), it is important to consider whether
managers with high incentives can take actions to minimize proposed audit adjustments and meet
earnings benchmarks. In a multi-task experiment using professional auditors, we investigate
whether managers with high incentives to overstate earnings can influence auditor judgments in
their favor. Our results indicate that when the manager takes an incentive-inconsistent action on
an initial proposed audit adjustment, auditors propose aggregate audit adjustments (across the
initial and a subsequent issue) of a smaller magnitude, and are more likely to allow the manager
to meet or beat the consensus analyst EPS forecast. We also find evidence of another clientfavorable
outcome regarding incentive-consistency: auditors put more trust in a manager who
initially takes an incentive-inconsistent action.


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