Organizational Design and Management Accounting Change

Changing management accounting systems requires more than appropriate implementation.It is argued that structural characteristics of an organization, centralization in particular, should also be taken into account when deciding on a change.Centralization implies higher costs of communication because the decision-maker has to obtain information from organizational participants who have incentives to inffluence the decision.A limit on communication reduces inffluence costs but at the same time it also lowers the quality of the decision.As a result of that, centralized organizations (i) will implement changes in their accounting systems less often than decentralized ones (ii) will more often implement top-down, i.e. ignore local information.organizational design;management accounting change;centralization;influence costs

Choquet Integrals With Respect to Non-Monotonic Set Functions

This paper introduces the signed Choquet integral, i.e., a nonmonotonic generalization of the Choquet integral. Applications to welfare theory, multi-period optimization, and asset pricing are described.Choquet integral;comonotonicity;arbitrage;time preference

Approximating the Finite-Time Ruin Probability under Interest Force

We present an algorithm to determine both a lower and an upper bound for the finite-time probability of ruin for a risk process with constant interest force. We split the time horizon into smaller intervals of equal length and consider the probability of ruin in case premium income for a time interval is received at the beginning (resp. end) of that interval, which yields a lower (resp. upper) bound.For both bounds we present a renewal equation which depends on the distribution of the present value of the aggregate claim amount in a time interval.This distribution is determined through a generalization of Panjer's (1981) recursive method.interest rate;probability

Optimal Tax Depreciation Lives and Charges under Regulatory Constraints

Depreciation is not only a representation of the loss in asset-value over time.It is also a strategic tool for management and can be used to minimize tax payments.In this paper we derive the depreciation scheme that minimizes the expected value of the present value of future tax payments for two types of constraints on the depreciation method.taxation;optimization;depreciation;uncertainty

On the Effects of the Degree of Discretion in Reporting Managerial performance

We consider a principal-agent setting in which a manager’s compensation de- pends on a noisy performance signal, and the manager is granted the right to choose an (accounting) method to determine the value of the performance signal. We study the effect of the degree of such reporting discretion, measured by the number of acceptable methods, on the optimal contract, the expected cost of com- pensation and the manager’s expected utility. We find that while an increase in reporting discretion never harms the manager, the effect on the expected cost of compensation is more subtle. We identify three main effects of increased report- ing discretion and characterize the conditions under which the aggregate of these three effects will lead to a higher or lower cost of compensation.managerial compensation;reporting flexibility