Nanyang Business School
Nanyang Technological University
Doctoral Seminar on Behavioral Research in Accounting
Trimester 2, 2003-2004
Instructor: Tan Hun Tong
Office:S3-01B-51
Telephone:67904819
Email:
This seminar introduces students to judgment and decision making research in accounting. The readings cover a broad domain, including issues related to auditing, financial reporting, and managerial decision making. The intention is that by the end of the course, students will acquire the skills to critically assess a piece of research, in terms of its contribution to theory, implications for practice, and methodology. More importantly, they should be able to plan and develop a research proposal.
Course evaluation
Research proposal 35%
Weekly summaries35%
Class presentation and discussion10%
Exam/ Paper critique20%
Research Proposal
Students will have to develop a proposal that involves an accounting issue from a judgment and decision making perspective. The objective is to get students involved in the actual creation of a research project, rather than be armchair critics of other people’s work. In this regard, it is fine if you plan on simple extensions of existing studies. A one-page summary of the idea is due by Week 7.
Weekly summaries, class presentation, class participation
For each of the assigned papers, a student will be assigned to lead the discussion on the specific paper. All students are expected to read these papers thoroughly before class, and engage in meaningful discussions. On the day before each class, students are to submit a writeup for each paper in a form and format that I will describe in the first class. Note that for some sessions, background readings will be prescribed. These background readings may not necessarily be discussed in detail in class, but they are helpful for gaining an appreciation of the issues at hand during the particular week.
Exam
The examination will take the form of a critique of a paper.
Week / Date / Topic / Readings1 / Introduction –
assessing behavioral accounting research
why a psychological lens ?
why experimentation? / Bonner (1999)
Libby and Luft (1993), p. 425-428
Libby, Bloomfield, and Nelson (2002), p. 775-780
Peecher and Solomon (2001)
2 / Determinants of Auditors’ Performance / Bonner and Lewis (1990); Discussant’s comments (Marchant 1990)
*Tan and Libby (1997)
*Solomon, Shields and Whittington (1999)
3 / The Audit Review Process – Process Gains by Reviewer / +Libby and Trotman (1993)
*Tan and Jamal (2001)
*Tan and Trotman (2003)
4 / Accountability and Performance / +Kennedy (1993)
*Tan (1995)
*Tan and Kao (1999)
5 / Auditors’ Reactions to Superior’s and Clients’ Preferences/ Does Professional Guidance Matter? / +Hackenbrack and Nelson (1996)
*Wilks (2002)
*Kadous, Kennedy and Peecher (2003)
6 / Auditor-client Negotiations/ Does Professional Guidance Matter? / +Libby and Kinney (2000)
*Ng and Tan (2003)
*Trotman, Wright and Wright (2003)
7 / Management Forecasts and Analysts’ Reactions / *Hunton and McEwen (1997)
*Libby and Tan (1999)
+Tan, Libby and Hunton (2002)
8 / Accounting Classification and Influence on Analysts’ and Investors’ Reactions / +Hopkins (1996)
*Maines and McDaniel (2000)
*Hirst, Hopkins, and Wahlen (2002)
9 / Management Disclosures and Influence on Analysts’ and Investors’ Reactions (I) / +Frederickson and Miller (2003)
*Sedor (2003)
*Krische (2003)
10 / Management Disclosures and Influence on Analysts’ and Investors’ Reactions (II) / +Kennedy, Mitchell and Sefcik (1998)
*Koonce, Lipe, and McAnally (2003)
*Hales (2003)
11 / JDM in Managerial Accounting contexts (I) / +Luft and Libby (1997)
*Lipe and Salterio (2000)
*Jamal and H.C. Tan (2003)
12 / JDM in Managerial Accounting contexts (II) / +Luft and Shields (2002)
*Vera-Munoz (1998)
*Kadous and Sedor (2003)
13 / Proposal presentations
* Written synopsis and presentation by individual student
+ Written synopsis only
Readings
Bonner, S. E. 1999. Judgment and decision-making research in accounting. Accounting Horizons 13(4): 385-398.
Bonner, S. E., and B. L. Lewis. 1990. Determinants of auditor expertise. Journal of Accounting Research (Supplement): 1-20.
Frederickson, J. R., and J. S. Miller. 2003. Pro forma earnings disclosures: Do analysts and nonprofessionals investors react differently? Working paper.
Hackenbrack, Karl and M. W. Nelson. 1996. Auditors’ incentives and their application of financial accounting standards. The Accounting Review, 71(1): 43-60.
Hales, J. W. 2002. Understanding bias and dispersion in forecasts: The role of motivated reasoning. Working paper.
Hirst, D. E., P. E. Hopkins, and J. M. Wahlen. 2001. Fair Values, Comprehensive Income Reporting, and Bank Analysts' Risk and Valuation Judgments. Working paper.
Hodge, F., J. J. Kennedy, and L. A. Maines. 2002. Recognition versus disclosure in financial statements: Does search-facilitating technology improve transparency? Working paper.
Hopkins, P. E. (1996). The effect of financial statement classification of hybrid financial instruments on financial analysts’ stock price judgments. Journal of Accounting Research, 34(Supplement): 33-50.
Hunton, J. E. and R. A. McEwen. 1997. An assessment of the relation between analysts’ earnings forecast accuracy, motivational incentives and cognitive information search strategy. The Accounting Review, 72(4): 497-515.
Jamal, K. and H. C. Tan. 2003. Effect of managerial foresight and accounting discretion on reporting of smooth earnings. Working paper.
Kadous, K., J. Kennedy, and M. E. Peecher. 2003. The effect of quality assessment and directional goal commitment on auditors’ assessments of client-preferred accounting methods. The Accounting Review 78(3): 759-778.
Krische, S. D. 2003. Investors’ evaluations of strategic prior period benchmark disclosures in earnings announcements. Working paper.
Libby, R., R. Bloomfield, and M. W. Nelson. 2002. Experimental research in financial accounting. Accounting, Organizations, and Society. 27: 775-810.
Libby, R. and W. R. Kinney. 2000. Does mandated audit communication reduce opportunistic corrections to manage earnings to forecasts? The Accounting Review 75(4): 383-404.
Libby, R. and J. Luft. 1993. Determinants of judgment performance in accounting settings: Ability, knowledge, motivation, and environment. Accounting, Organizations and Society, 18(5): 425-450.
Libby, R. and K. T. Trotman. 1993. The review process as a control of differential recall of evidence in auditor judgments. Accounting, Organizations and Society, 18(6): 559-574.
Lipe, M. G., and S. E. Salterio. 2000. The balanced scorecard: Judgmental effects of common and unique performance measures. The Accounting Review, 75(3): 283-298.
Luft, J., and R. Libby. 1997. Profit comparisons, market prices and managers’ judgments about negotiated transfer prices. The Accounting Review, 72(2): 217-229.
Luft, J., and M. Shields. 2001. Why Does Fixation Persist? Experimental Evidence on the Judgment Performance Effects of Expensing Intangibles. The Accounting Review, 76 (3)
Maines, L. A. and L.S. McDaniel 2000. Effects of comprehensive income volatility on nonprofessional investors’ judgments: The role of presentation format. The Accounting Review
Peecher, M. E. (1996). The influence of auditors’ justification processes on their decisions: A Cognitive model and experimental evidence, Journal of Accounting Research, 34(1), 125-140.
Solomon, I., M. D. Shields, and O. R. Whittington. 1999. What Do Industry-Specialist Auditors Know? Journal of Accounting Research, 37(1): 191-208.
Tan, H. T. (1995). Effects of expectations, prior involvement, and review awareness on memory for audit evidence and judgment. Journal of Accounting Research, 33(1): 113-135.
Tan, H. T. and R. Libby. 1997. Tacit Managerial versus Technical Knowledge as Determinants of Audit Expertise in the field. Journal of Accounting Research, 35(1): 97-114.
Tan, H. T., R. Libby, and J. Hunton. (2002). Analysts’ reactions to preannouncement strategies. Journal of Accounting Research 40(1): 223-246.
Tan, H. T. and A. Kao. (1999). Accountability effects on auditors’ performance: Journal of Accounting Research, 37(1): 209-224.
Tan, H. T., and K. T. Trotman. 2003. Reviewers’ responses to anticipated stylization attempts by preparers of audit workpapers. The Accounting Review 78(2): 581- 604.
Trotman, K. T., A. Wright, and S. Wright. 2003. Auditor negotiations: An examination of the efficacy of intervention methods. Working paper.
Vera-Munoz, S. C. 1998. The effects of accounting knowledge and context on the omission of opportunity costs in resource allocation decisions. The Accounting Review, 73(1): 47-72.
Wilks, J. 2002. Predecisional Distortion of Evidence as a Consequence of Real-Time Audit Review. The Accounting Review, 77(1).