Cahiers de recherche

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Départements : Comptabilité et Contrôle de Gestion, GREGHEC (CNRS)

The observed smoothing of earnings (i.e. negative contemporaneous correlation between accruals and cash flows) is the joint product of the role of accruals in smoothing out transitory fluctuations in operating cash flows (noise reduction role) and the role of accruals in providing timely gain and loss recognition (contracting role). These two roles of accruals have opposite effects on earnings smoothing properties. We demonstrate that failing to control for changes in timely gain and loss recognition as firms shift to IFRS can lead to erroneous inferences regarding the effects of IFRS adoption on earnings smoothing, and consequently on researcher’ conclusions about how IFRS adoption has affected accounting quality. Our results are consistent with IFRS adoption resulting in a change in the contracting role rather than the noise reduction role of accruals. A decrease in timely loss recognition, an increase in timely gain recognition, and a net decrease in asymmetric timely loss recognition are what drives the change in observed smoothing of earnings.

Mots clés : Earnings smoothing, IFRS, Timely gain and loss recognition

Départements : Comptabilité et Contrôle de Gestion, GREGHEC (CNRS)

While increases in earnings are common, we identify a setting in which they signal a separating equilibrium. Firms that “defy gravity’ (DG) by reporting increases in earnings despite experiencing a decline in sales from continuing operations, signal their viability as a going- concern, and achieve separation from other firms with decreasing sales. We find that DG signals higher future earnings, cash flows, and one-year-ahead stock returns. More importantly, we find that the DG signal is more credible when more costly to produce: DG firms subsequently perform better when (1) they are ex ante in poorer financial health, (2) the magnitude of the earnings shortfall is larger (they have higher downward cost rigidity), (3) they pass up the opportunity of taking a ‘big bath’ in times of crisis (years where declines in earnings can be blamed on economy-wide shocks), and (4) when they have less flexibility to manage earnings upwards. Finally, because some degree of pooling remains within DG firms, we show that the DG signal is more credible when it is produced contemporaneously with abnormal CEO buying. To our knowledge, this study is the first to provide empirical evidence that earnings increases that are more costly to achieve are more credible signals of future performance.

Mots clés : Signaling, Costliness, Credibility, Earnings

Départements : Economie et Sciences de la décision, GREGHEC (CNRS), Comptabilité et Contrôle de Gestion

We study the impact of a new nationally advertised six-month intensive training program to encourage social entrepreneurship among youth. Program costs were on the order of 12,000 euros per participant. We conduct a randomized field experiment where 50 applicants were randomly allocated to the program and 50 similar applicants were rejected. We measure social entrepreneurial skills, intentions, aspirations and actions, progress towards launching a venture, and some non-cognitive skills pre and post treatment. Treatment effects were marginal on ventures’ progression six months after program completion. We find no treatment effects on non-cognitive skills, intentions or aspirations. Those that had made more progress on their venture prior to the start of the program were more likely to make progress afterwards, irrespective of whether they joined the program or not. Training people to become entrepreneurs seems to be difficult and costly.

Mots clés : Field experiment, Social entrepreneurship, Entrepreneurship

Départements : Comptabilité et Contrôle de Gestion, GREGHEC (CNRS)

This paper examines how corporate reliance on budgets is affected by major changes in the economic environment. We combine survey and archival data from the economic crisis that began in 2008. The results indicate that, as a result of the economic crisis, budgeting became more important for planning and resource allocation but less important for performance evaluation. Additional evidence from interviews and data gathered in a focus group further illustrate these results and show the changes organizations have introduced to respond to the economic crisis. Taken together, and contrary to more general conclusions from the literature such as an overall increase or decrease in the importance of budgeting, we find that companies emphasize certain budgeting functions over others during economic crises.

Mots clés : Budgeting, budgeting functions, economic crisis, crisis management

Départements : Comptabilité et Contrôle de Gestion, GREGHEC (CNRS)

Prior research has documented the continued existence of an expectation gap, defined as the divergence between the public’s and the profession’s conceptions of auditor’s duties, despite the auditing profession’s attempt to adopt standards and practices to close this gap. In this paper, we consider one potential explanation for the persistence of the expectation gap: the role of media bias in shaping public opinion and views. We analyze press articles covering 40 U.S. corporate fraud cases discovered between 1992 and 2011. We compare the auditor’s duties, described by the auditing standards, with the description of the fraud cases as found in the press articles. We draw upon prior research to identify three sources of the expectation gap: deficient performance, deficient standards, and unreasonable expectations. The results of our analysis provide evidence that: (1) The performance gap can be reduced by strengthening auditor’s willingness and ability to apply existing auditing standards concerning fraud detection; (2) The standards gap can be narrowed by improving existing auditing standards; (3) Unreasonable expectations, however, involve elements beyond the profession’s sphere of control. As a result, the expectation gap is unlikely to disappear given the media’s tendency to bias, with an overemphasis of unreasonable expectations in their coverage of frauds and press articles tending to reinforce the view that the auditor should take more responsibility for detecting fraud, irrespective of whether this is feasible at a reasonable cost. In addition to the primary role of the press in perpetuating the expectation gap, a second reason for continuation of the expectation gap is that the rational auditor will have difficulty in assessing subjective components of fraudulent behavior.

Mots clés : Expectation gap, Media bias, Corporate fraud, Management behavior, Press, Fraud-related professional standards

Départements : Comptabilité et Contrôle de Gestion, GREGHEC (CNRS)

This article aims to clarify the consequences of accounting conservatism from a stewardship (principal-agent) point of view. Prior literature argues that the limited liability of the agent always results in a demand for conservatism, and that conservatism is beneficial because it deters earnings management. I challenge both arguments. Firstly, I show and derive the conditions under which an aggressive (or liberal) accounting information system might be preferred to a conservative one when the agent has limited liability. Risk aversion plays a crucial role, with a higher degree of risk aversion encouraging increased aggressiveness. Secondly, I provide the stylized example of choosing between rules-based (Rules ) and principles-based (Principles ) accounting. The latter, involving greater subjectivity, might increase the likelihood of earnings manipulation, but enables the agent to communicate relevant, albeit self-serving, private information. Both effects result in Principles being less conservative than Rules. I show that Principles might, nonetheless, be optimal, depending on the value of the likelihood ratio of manipulation versus the provision of relevant information. Manipulation and self-serving reports, which introduce an aggressive bias, might be the price to pay for more informative accounts.

Mots clés : Earnings management, Accounting conservatism, Limited liability, Ranking of accounting information systems, Principal Agent

Départements : Comptabilité et Contrôle de Gestion, GREGHEC (CNRS)

This paper examines the fair value management of Employee Stock Options (ESOs). Departing from earlier literature focused on input estimates, we study management of the valuation model itself, seen in the ad-hoc adjustments made by companies to generally accepted models. Our analysis is based on a unique sample of ESOs in an IFRS context for which detailed disclosure is available. We find evidence of model management, with a median understatement of 52% compared to our benchmark model, which is designed to control for ESO-specific characteristics and input estimates. Furthermore, we identify three levers for model management: dilution, non-tradability of the option, and transaction costs. We conduct an in-depth analysis of companies’ arguments for making these ad-hoc adjustments and find no grounds for them. This paper highlights model management as a relevant issue for ESO fair value which has direct consequences for standard setters and enforcement authorities.

Mots clés : Fair value, ESO, Transaction costs, IFRS 2, Dilution, Non-Tradability

Départements : Comptabilité et Contrôle de Gestion

Cet article décrit une méthode d'Action Learning pour enseigner l'intelligence situationnelle. Elle vise à aider les managers à trouver des réponses appropriées aux situations complexes de management qu'ils rencontrent. Après avoir revu les différentes écoles de pensée concernant le leadership et les meilleurs pratiques de management, nous définissons l'intelligence situationnelle comme l'intelligence des situations, de soi et des autres, et la capacité à réconcilier autant que possible les intérêts des différents acteurs impliqués dans la situation. Nous utilisons les contradictions sous jacentes au management de conquête et au management de finesse comme cadre de référence. La méthode "Fidelio", évolution de l'approche "Solfi" utilisée à HEC depuis 1999, utilise les théories du leadership et met l'accent sur des concepts récents ou récemment renouvellés comme l'intelligence émotionnelle, la théorie des rôles, les contradictions et les paradoxes, l'incertitude et l'ambiguité dans le management, etc. Les ressources pédagogiques consistent en un questionnaire, des ateliers, des entretiens individuels, et des rapports post-ateliers. Elles contribuent au développement personnel, à la découverte des concepts du management et à l'animation des équipes. Les participants expérimentent différentes façon de se représenter leurs situations et par conséquent font évoluer leurs comportements de leadership. Ils prennent conscience que le leadership est contextuel et qu'il est nécessaire d'utiliser des références théoriques. Ils travaillent aussi leur capacité à manager les contradictions.

Mots clés : Démarche FIDELIO, Leadership, Déformation continue des managers, Situations managériales, Contradictions, Paradoxes

Départements : Comptabilité et Contrôle de Gestion

The first part of the paper presents the specificities of management control in service activities. The second part of the paper is more specifically dedicated to the assessment of discretionary activities; it proposes a general framework for the evaluation of discretionary activities before reviewing the assessment tools available. The third part of the paper addresses the problems specific to the control of service companies. Based on a general model of cost vale creation in a service company, it discusses some issues related to the organisation of control in multi-site and network companies. Finally, the last part of the paper focuses on support departments and structures the recent debates about their possible control through new organizational forms.

Mots clés : Service activities, management control, performance assessment

Départements : Comptabilité et Contrôle de Gestion

This article presents a summary of the Strategic Management Accounting (SMA) literature. In its first part, the article shows how authors define SMA (by its characteristics, its practices and methods) and compares SMA to Strategic Cost Management (SCM). The second part of the article discusses the empirical research work conducted in the SMA/SCM field and its main results. The article then questions the theoretical contribution of the SMA/SCM literature and its limitations before proposing a framework which relates the concepts of costs, value and price, and incorporates many of the practices usually connected to SMA.

Mots clés : Strategic Management Accounting, Strategic Cost Management, literature review