Research seminars

Joint seminar HEC/ESSEC - Localization of Global Accounting Practices: A comparative analysis of practice variation in response to institutional complexity

Accounting & Management Control

Speaker: Eksa Kilfoyle
University of Windsor, Ontario, Canada

20 June 2017 - Champerret - Amphi 461 - From 2:00 pm to 4:00 pm

We conduct a comparative analysis of the initial stages of implementation of global accounting and control practices in two member organizations of an international network. We analyze organizational responses to institutional pressures. We attend to nested institutional levels and show how institutional logics, enacted by executives in early stages of implementation, mediate variations in the localized accounting and control practices. Our study contributes to understanding how field level pressures shape practice variation beyond loose coupling and decoupling. We also highlight the importance of early stages of localization of accounting practices, given the path dependent nature of institutions. Executive team decisions and actions in response to field level pressures in the early stages of localization shape organizational responses to the introduction of global accounting practices. We find that localized accounting and control practices are institutional hybrids and we propose a process that explains the source of variations in these accounting hybrids.

R Share Repurchases and Accounting Conservatism

Accounting & Management Control

Speaker: Gerald Lobo
University of Houston

13 June 2017 - HEC Paris - room T004 - From 2:00 pm to 4:00 pm

The prior literature indicates that financial policy (e.g., payout policy) as well as accounting policy (e.g., conservatism) can be used to address incentive problems in firms. Similar to findings in Louis and Urcan (2014) who study cash dividends, we find that stock repurchases, an increasingly popular form of payout, are negatively related to conservatism, suggesting that these mechanisms are substitutes. Extending this analysis, and focusing on a particular manifestation of the incentive problem (managerial propensity to engage in overinvestment using free cash flows), we find that in firms with high levels of free cash flows, the negative relation between share repurchase and conservatism is stronger. By contrast, we find that the substitution effect is weaker when CEO tenure is higher, which confirms that more powerful CEOs have less incentives to solve the overinvestment problem. In an ancillary test, we show that the stock market reaction to share repurchases is increasing in conservatism, suggesting that the relation between conservatism and repurchases is complex (i.e., with multiple dimensions).

Re-forming healthcare: The role of accounting artifacts

Accounting & Management Control

Speaker: Jeff Everett
York University

2 June 2017 - HEC Paris - Room T004 - From 2:00 pm to 4:00 pm

This study examines the role accounting plays in major healthcare-policy-reform processes.
Focusing on a single hospital site in the African nation of Ghana, and starting from the practice theory of Pierre Bourdieu, the study analyzes how different forms, constructions, and classifications of accounting information—or accounting artifacts—shape policy regimes and facilitate particular patterns of activity and interaction. It further examines how these regimes and patterns, in conjunction with the embedded social memory or habitus of individual actors, in turn lead to the construction and use of new artifacts. The study also highlights how hospital staff and patients use various tactics to work with and around these artifacts, resulting in at times unintended consequences and the need to pursue new policy directions. In so doing, the study furthers our understanding of why policy-reform processes in the field of healthcare are so often sequential in nature.

6th Interpretive Accounting Workshop

Accounting & Management Control

19 May 2017 - Champerret room 411 - From 9:00 am to 11:30 am

Accounting of and for the World Multiple: The Sales and Operations Forecast and The Enactment of ’The Flow of The Product

Accounting & Management Control

Speaker: Jan Mouritsen
Copenhagen Business School

19 May 2017 - HEC Champerret - Amphi 471 - From 2:00 pm to 4:00 pm

This is a study of the role of accounting when the world is ontologically multiple. It analyses the construction of a Sales and Operational Planning (S&OP) forecast intended to coordinate laterally dependent processes of an inaccessible ‘underlying’ ‘flow of the product.’ This is important because much literature focuses on the constitutive dimensions of accounting whereby it deemphasises how the world may impact inscription work. Drawing on Latour’s two modes of existence – mode of substance and mode of reference – the paper analyses the development of a sales forecast intended to be mechanism from where all the firms’ – EuroTech – activities might be coordinated. It finds that not only accounting has a history but also the world and this emphasises the importance of so-called crossing points where accounting is imbued with new capability – not only inscription but also prescription, circumscription and conscription. During crossing points, accounting mechanism proliferate rather than substitute each other and they become engaged in articulating multiple ontologies; but only to a certain extent because coordination points towards an enduring problem of the frailty of multiply ontologies.

6th Interpretive Accounting Workshop

Accounting & Management Control

18 May 2017 - Champerret room 411 - From 2:00 pm to 6:00 pm

Joint seminar ESSEC/HEC - Direct Measures of Auditors’ Quantitative Materiality Judgments: Properties, Determinants and Consequences for Audit Characteristics and Financial Reporting Reliability

Accounting & Management Control

Speaker: Katherine Schipper
Duke University

4 May 2017 - CNIT Paris La Défense - Amphi 236 - From 11:00 am to 1:00 pm

For a large sample of audits carried out during 2005-2015 by eight large accounting
firms and inspected by the PCAOB, we provide evidence on the properties of auditors’
quantitative materiality judgments and the consequences of those judgments for both audit
characteristics (audit fees, audit hours, and detected misstatements) and financial reporting
outcomes (unreliable financial reports, proxied by restatements). We find that auditors’
quantitative materiality judgments do not appear to result only from applying conventional rulesof-
thumb, specifically, 5% of pre-tax income, but instead are associated with qualitative factors
suggested by authoritative guidance and with size-related financial statement outcomes (income,
revenues and assets); weights placed by auditors on these outcomes vary with client
characteristics such as profitability. We construct a materiality slack measure that makes
individual audit-firm-specific materiality judgments comparable with regard to whether they are
looser or tighter within boundaries specified by non-authoritative guidance in audit-firm policies.
We find that materiality slack (that is, relatively looser materiality) is associated with fewer audit
hours, lower audit fees, and a lower amount of detected misstatements. After controlling for
other factors including decisions to waive audit adjustments, we find evidence that looser
materiality judgments are associated with greater incidences of restatements.

Buying Products from Whom You Know: Personal Connections and Information Asymmetry in Supply Chain Relationships

Accounting & Management Control

Speaker: Ron Shalev
NYU Stern School of Business

28 April 2017 - HEC Paris- Room T015 - From 2:00 pm to 4:00 pm

This study investigates whether the ability of executives to mitigate information asymmetry via interpersonal connections can affect the formation and the contractual terms of customer-supplier relations. We find that both educational and past work-based personal connections increase the likelihood of a potential supplier (hereinafter: vendor) becoming an actual supplier (hereinafter: supplier). The magnitude of the effect varies across management ranks and positions. Personal connections grow in importance when information asymmetry between the vendor and customer increases and thus affect both the choice of suppliers and contractual terms. Finally, transacting with a personally connected supplier can mitigate supply chain interruptions and improve customer performance.

Determinants and Consequences of Presentation Format: The Case of ETR Reconciliations

Accounting & Management Control

Speaker: Sundaresh Ramnath
University of Miami

21 April 2017 - HEC Paris - room T004 - From 2:00 pm to 4:00 pm

SEC Regulation S-X requires companies to reconcile deviations between their actual tax expense and their expected tax expense under federal statutory tax rates (effective tax rate (ETR) reconciliation). This regulation permits companies to choose between a dollar or percentage format for the ETR reconciliation. In our sample, roughly half the firms choose one of the two formats. We investigate the causes and consequences of this disclosure decision. We find, consistent with a political cost argument that firms with low (high) ETRs, through their choice of presentation format, tend to highlight the dollar (percentage) amount of the tax expense. We also find that users such as analysts seem to find the percentage format easier to use and tend to make smaller errors in their ETR forecasts when firms present their ETR reconciliation in the percentage format. Moreover, analysts’ ETR forecast dispersion is higher when companies present reconciliation in the dollar format, consistent with analysts’ comfort (or lack thereof) when information is presented in an easily usable (less straightforward) format.

Political rationalities of calculation: articulating sovereignty and governmentality

Accounting & Management Control

Speaker: Rita Samiolo
University of Innsbruck

7 April 2017 - HEC Paris - room T004 - From 2:00 pm to 4:00 pm

Drawing on studies of “governmentality” and “world society theory”, this paper revisits the theme of
calculation in government. Through the particular case of Italy and of a controversy which has divided the Italian state for decades – the safeguard of the city of Venice – it examines the relationship between specific notions of the state, ways of questioning and problematising it, and the use of numbers and technologies of calculation. More specifically, this paper traces the discursive conditions within which a calculative tools such as environmental impact assessment (EIA) and cost-benefit analysis (CBA) came to be seen as indispensable in order to decide upon the flood protection scheme for Venice. Enrolled in the effort to “rationalize” and “democratize” the state and to reform it “from the outside” by means of international expertise, EIA and CBA became the object of a fierce scientific and political controversy which was ultimately not resolved on the grounds of calculation. The paper shows how a specific way of reasoning about the state and its shortcomings – well established in the Italian political science literature and reflected in the specific debates revolving around the case of Venice – defeated the optimisation logic which the EIA and CBA were supposed to bring about. The paper concludes that calculation, seen as a core feature of contemporary governmentality, can find its limits at the intersection of different governmental strategies or “modes” of governmentality, whose historical roots may be found in what Foucault discussed as “the state of diplomacy” and “the state of police”.

5th annual HEC/ESSEC joint research workshop organized by HEC Paris

Accounting & Management Control

17 March 2017 - HEC Champerret - Room 293 - From 9:30 am to 4:00 pm

Capitalization: A Cultural Guide

Accounting & Management Control

Speaker: Fabian Muniesa
Mines Paris Tech

3 March 2017 - HEC Paris - room T004 - From 2:00 am to 4:00 am

What does it mean to turn something into capital? What does considering things as assets entail? What does the prevalence of an investor’s viewpoint require? What is this culture of valuation that asks that we capitalize on everything? How can we make sense of the traits, necessities and upshots of this pervasive cultural condition?

This book takes the reader to an ethnographic stroll down the trail of capitalization. Start-up companies, research centers, consulting firms, state enterprises, investment banks, public administrations: the territory can certainly prove strange and disorienting at first sight, with its blurred boundaries between private appropriation and public interest, economic sanity and moral breakdown, the literal and the metaphorical, the practical and the ideological. The traveler certainly requires a resolutely pragmatist attitude, and a taste for the meanders of signification. But in all the sites in which we set foot in this inquiry we recognize a recurring semiotic complex: a scenario of valuation in which things signify by virtue of their capacity to
become assets in the eye of an imagined investor.

A ground-breaking anthropological investigation on the culture of contemporary capitalism, this work directs attention to the largely unexplored problem of capitalization and offers a critical resource for current debates on neoliberalism and financialization.

Is Transparency a Recipe for Innovation? The Real Effects of Reporting Regulation

Accounting & Management Control

Speaker: Xi Li
London School of Economics

27 January 2017 - HEC Paris - Room T017 - From 2:00 pm to 4:00 pm

Rajan and Zingales (1998, 2003) argue that good accounting standards and disclosure rules
reduce the wedge between the cost of internal and external funds and enhance growth. We test
the causal link between financial reporting and growth using a quasi-natural experiment – the
mandatory adoption of International Financial Reporting Standards (IFRS) across the world -
and examine its effect on innovation, a corporate activity that directly drives economic growth.
Our Difference-in-Differences (DiD) results suggest that improved financial reporting leads to
more innovation in the long run – it generates more patents and patents with higher impact. We
also find that the positive effect of improved financial reporting on innovation is more
pronounced among industries with higher dependence on external financing, consistent with
the role of good financial reporting in reducing the cost of external financing. In addition, we
find results consistent with the managerial learning hypothesis that managers are able to learn
from the stock market after improved financial transparency. Our paper sheds new light on the
real effects of financial reporting.

Credit availability for Social Enterprises: field study evidence

Accounting & Management Control

Speaker: Marika Arena
Politecnico di Milano

7 October 2016 - HEC Paris Room T030 - From 2:00 pm to 4:00 pm

This paper aims to analyze the complex relationship between the organizations engaged in the social business sector, and the banking systems, with particular focus on the problem of access to credit for Small and Medium sized Social Enterprises (SMSEs). Recently these organizations had to confront themselves with the need of diversifying their funding sources, that traditionally relied grants and donations and started to apply for credit from commercial banks. Still, only a limited percentage of the applicants do obtain the requested funding. Against this background, the paper explores the characteristics of the lending technologies that are currently used by banks for SMSEs and discusses the impacts of these choices in terms of SMSEs capacity to access to commercial finance.

A time-series analysis of the macro-level factors affecting annual report length

Accounting & Management Control

Speaker: Rick Mergenthaler
University of Iowa

9 September 2016 - HEC Paris - Room T030 - From 2:00 pm to 4:00 pm

We examine why the length of annual reports has grown approximately ten-fold from the early 1900s to today. We rely on prior literature to identify four theories (litigation, enforcement, standard setting, and investor demand) that could explain, at least in part, the growth in annual report length. We use a data set that includes annual reports from the early 1900s through 2006 that uniquely positions us to answer our question of interest. We implement a time-series research design where we regress the average increase in page length not explained by cross-sectional variables on macro-factors that we predict will impact time-series variation in page length. We find that increases in SEC enforcement and the number of interpretive standards issued by the FASB are positively associated with increases in annual report length. We also find that that a downtick in market returns, our proxy for negative market sentiment, is associated with increases in annual report length. Finally, we find that increases in macro uncertainty are associated with decreases in annual report length. Overall, our evidence suggests that enforcement, standard setting and investor demand have contributed to the increase in annual report page length and that these factors explain a large portion of the time-series variation in page length. Our analysis helps characterize the complete set of forces contributing the rise in annual report page length, and can inform regulators and standard setters as they try to address disclosure overload and its documented negative effects on users of financial reports.