Mareike Hornung, Robert Luther and Peter Schuster
Making rational and undistorted corporate investment decisions is critically important to organisations. “Scientific” investment appraisal can play a central role, particularly…
Abstract
Purpose
Making rational and undistorted corporate investment decisions is critically important to organisations. “Scientific” investment appraisal can play a central role, particularly setting the hurdle rate. Empirical research reveals that actual rates generally exceed organisations’ cost of capital – the so-called hurdle rate premium (HRP) puzzle. Allowing for bounded rationality of corporate decision-makers, the purpose of this paper is to mobilise the retrievability cognitive bias as one explanation of this paradox.
Design/methodology/approach
A systematic structuring and investigation of the legacy of eight scenarios, representing “correct” and “incorrect” decisions on “good” and “bad” proposals, is used to explain the inconsistency between normative capital investment theory and actual practice.
Findings
Decision makers’ cognitive processes based on informal perceptions, strengthened by the scope of formal post-audit routines, provide a plausible explanation why investment decision makers tend to systematically set hurdle rates too high.
Research limitations/implications
The findings have still to be explored in more depth by fieldwork and experimental research.
Practical implications
The policy implications of this study are that corporate success could be enhanced by making executives aware of the HRP phenomenon and of its behavioural causes; also by including significant rejected investment proposals in the post-audit programme and communicating the opportunity cost of “false negative” decisions on proposals not adopted.
Originality/value
The paper provides a new explanation for a recognised phenomenon: Allowing for bounded rationality of corporate decision-makers, the paper applies research on a cognitive bias to the setting of the hurdle rate in investment appraisal.
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Robert G. Luther, John Matatko and Desmond C. Corner
Examines the impact on investment returns of stated non‐financialcriteria by utilizing information on UK “ethical” unittrusts. Over a limited period of observation there was weak…
Abstract
Examines the impact on investment returns of stated non‐financial criteria by utilizing information on UK “ethical” unit trusts. Over a limited period of observation there was weak evidence of some overperformance on a risk‐adjusted basis by “ethical” unit trusts. Suggests arguments that might intuitively explain overperformance or underperformance. There is clear evidence that the “ethical” trusts have UK investment portfolios more skewed towards companies with low market capitalization than the market as a whole. Associated with this, they tend to be invested in low dividend yield companies. The degree of international diversification varies and a suitable international benchmark may be needed to separate out any “ethical” effect.
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Magdy Abdel-Kader and Robert Luther
IFAC's Management Accounting Practice Statement Number 1, revised in 1998, is concerned with management accounting practices. This research note describes an operationalization of…
Abstract
IFAC's Management Accounting Practice Statement Number 1, revised in 1998, is concerned with management accounting practices. This research note describes an operationalization of its conception of the evolution of management accounting. The paper is informed by experience in developing and applying an IFAC-based model to survey the stage of evolution of the management accounting practices in a United Kingdom industry sector. The model is intrinsically interesting and has the potential for replication in other contexts and in comparative cross-national, inter-industry or longitudinal studies.
Robert Luther and Paul Keating
The 1986 Green Paper on Profit‐related Pay (PRP) saw the initiativeas contributing to the elimination of the “them and usmentality” from British industry. Considers the impact of…
Abstract
The 1986 Green Paper on Profit‐related Pay (PRP) saw the initiative as contributing to the elimination of the “them and us mentality” from British industry. Considers the impact of PRP and shows the Green Paper’s view to be optimistic. This conclusion derives from an examination of the PRP scheme and its context within government policies on taxation, employment, industrial democracy and industrial relations. These are shown to be exacerbating the inequalities of reward and power out of which the categories “them and us” are structured. Given this, it is difficult to see PRP promoting industrial unitarism.
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Magdy Abdel‐Kader and Robert Luther
This paper seeks to investigate and report on the management accounting practices in the British food and drinks industry.
Abstract
Purpose
This paper seeks to investigate and report on the management accounting practices in the British food and drinks industry.
Design/methodology/approach
The data are generated by a large‐scale postal questionnaire which was informed by preliminary interviews. Further interviews were carried out to aid interpretation of the responses. Descriptive statistics on the importance and frequency of use of individual practices provide the basis for discussion.
Findings
Direct costing is widely practised and important, by contrast with activity‐based costing and full absorption costing. Despite the limitations of conventional budgets, they remain a central management accounting “pillar” and are frequently used in “what if?” analyses. The balanced scorecard and other non‐financial performance measures are perceived to be important but never or rarely used by 40 per cent of companies. Product profitability analyses are frequently applied and, surprisingly, the profitability of supplying individual customers is frequently calculated by over 50 per cent of the population. Respondents were sceptical about sophisticated DCF investment appraisals.
Practical implications
Traditional management accounting is “alive and well” but there are indications of likely increased use of: information concerning the cost of quality; non‐financial measures relating to employees; and analyses of competitors' strengths and weaknesses. There is evidence of a gap between current textbooks and actual practices.
Originality/value
The survey provides a unique detailed examination of actual management accounting practices and an indication of future trends.
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In 1967, Robert N. Bellah famously argued that there existed an “American Civil Religion,” which was distinct from churchly religion and captured the “transcendental” dimension of…
Abstract
In 1967, Robert N. Bellah famously argued that there existed an “American Civil Religion,” which was distinct from churchly religion and captured the “transcendental” dimension of the American project. In this chapter, I revisit the civil religion concept and reconstruct it along more Weberian lines. Specifically, I argue that the civil religion tradition is one of three competing traditions for thinking about the proper relationship between religion and politics in America; the other two are religious nationalism and liberal secularism. Whereas liberal secularism envisions a complete separation of the religious and political value spheres, and religious nationalism longs for their (re)unification, civil religion aims for a mediating position of partial separation and productive tension. Following Bellah, I argue that the two central strands of the civil religion tradition have been covenant theology and civic republicanism. The body of the chapter sketches out the development of the tradition across a series of national foundings and refoundings, focusing on the writings of leading civil theologians from John Winthrop and John Adams through Abraham Lincoln and John Dewey to Martin King and Barack Obama. The conclusion advances a normative argument for American civil religion – and against liberal secularism and religious nationalism. I contend that liberalism is highly inclusive but insufficiently solidaristic; that religious nationalism is highly solidaristic but insufficiently inclusive; and that only civil religion strikes a proper balance between individual autonomy and the common good.
This paper analyzes citations from the first 20 volumes of Advances in Management Accounting using Google Scholar in April and May, 2013.
Abstract
Purpose
This paper analyzes citations from the first 20 volumes of Advances in Management Accounting using Google Scholar in April and May, 2013.
Methodology/approach
This study assesses the success of the first 20 volumes of Advances in Management Accounting using citation analysis. Four citation metrics are used. The four citation metrics are: (1) total citations since year of publication until April and May, 2013, (2) citations per author since year of publication until April and May, 2013, (3) citations per year since year of publication until April and May, 2013, and (4) citations per author per year since year of publication until April and May, 2013.
Findings
The top 20 authors for each citation metric, the top 20 faculties for each citation metric, and the top 20 doctoral programs for each citation metric are determined. Furthermore, the top 20 articles are determined using two citation metrics and the H-index for Advances in Management Accounting is computed.
Originality/value of paper
Potential doctoral students, current doctoral students, “new” Ph.D.s with an interest in management accounting, current management accounting faculty, department chairs, deans, other administrators, journal editors, and journal publishers will find these results informative.
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Ching Choo Huang, Michael Tayles and Robert Luther
The purpose of this paper is to explore several contingency variables, namely environmental uncertainty, business strategy, technological advancement, market to book ratio, size…
Abstract
Purpose
The purpose of this paper is to explore several contingency variables, namely environmental uncertainty, business strategy, technological advancement, market to book ratio, size, profitability and industry type in the context of management accounting and the availability of internal intellectual capital (IC) information.
Design/methodology/approach
A questionnaire was developed and posted to the managers of Malaysian companies. A multiple regression statistical technique was employed to analyse the data.
Findings
It is found that business strategy and technological advancement of customer service relate positively to the availability of internal IC information in Malaysian companies.
Research limitations/implications
The relatively small response of usable replies to the questionnaire survey is a limitation of this paper. The finding implies that companies with more internal IC information are more likely to be those of product differentiators and those who have undergone technological advancement of customer service. Malaysian companies tend to have a strong customer orientation and place great emphasis on managing customer capital (CC). Future research can investigate the types of IC information used by Malaysian managers to manage their CC.
Originality/value
This paper contributes to the literature as it examines the relationship between context and IC within a contingency theory framework. Unlike other research which relates to external IC disclosures with firm‐specific variables, this research links contingency factors to internal IC information from related fields (management accounting and external IC reporting).
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Robert Luther and Iaad Issa Sartawi
This paper aims to use empirical data to classify and contextualize the various practices of quality costing.
Abstract
Purpose
This paper aims to use empirical data to classify and contextualize the various practices of quality costing.
Design/methodology/approach
The paper uses 23 “best practices” of quality costing extracted from the literature to survey quality managers of 88 publicly listed Jordanian manufacturing firms. Exploratory factor analysis is then used to create an empirical taxonomic framework.
Findings
Factor analysis of the data identifies a six‐factor structure of the practices of quality costing (PQC). Inspection of the component items shows the factors to be conceptually meaningful with none of them containing conflicting items. All factors are reliable and valid and have statistically sound structures.
Research limitations/implications
The classification provided can help managers to better visualize, understand and implement the concept of quality costing. It provides a framework within which practices can be structured and evaluated; managers can identify areas in their firms that are missing and may warrant improvement. The findings should be treated cautiously: the operational definition of PQC derives from an inconsistent literature. Furthermore, the findings are based on self reported data, collected through a questionnaire in Jordan and there is potential source bias or general method variance.
Originality/value
This paper contributes to the body of knowledge through operationalizing the overall concept of quality costing by means of the PQC scale. The six factors identified represent latent constructs within PQC and the component items operationalize such constructs. Furthermore, the procedure provides an illustration of pragmatic application of exploratory factor analysis to empirical managerial data, which can be used in other contexts.