The interfirm contracting value of management accounting information

We examine how firms’ management accounting information influences interfirm contract design. We theorize that comprehensive accounting information enables firms to design more complete contracts with suppliers, as indicated by increased issue inclusiveness and clause specificity. Survey data of Japanese manufacturing firms about the management of supplier relationships support the expectation that comprehensive management accounting information enables the development of more inclusive and specific contracts with suppliers. These contracts are also less subject to additional informal agreements between exchange partners. These results are consistent with the idea that better accounting information enables more complete contracting

Information availability in acquisition decisions:The role of prior relations and rival bidders

This study uses detailed survey data from key decision makers in acquiring firms to test the impact of information availability in corporate acquisitions on pre-acquisition valuation and post-acquisition performance. Our results provide support for the hypothesis that information constraints at the time of target valuation are associated with greater overpayment and weaker post-acquisition performance. Prior ties between firms are found to reduce information constraints to acquiring managers, and thereby reduce overpayment and increase post-acquisition performance. Bids by other potential acquirers are found to signal their private information about the target, providing a substitute for lacking information. This effect holds particularly for non-financial data, which are harder to obtain. These findings suggest that overpayment and underperformance can be prevented not only when an acquirer possesses more information, but also when in the absence of needed information, the presence of rival bidders signals their private information about the value of the target

When one size does not fit all:Using <i>ex post</i> subjective ratings to provide parity in risk-adjusted compensation

Firms typically use a ‘one-size-fits-all’ (OSFA) compensation contract that specifies a common formulaic relation between performance and compensation (i.e., a performance bonus) for non-executive managers in similar jobs. However, a contract that is appropriate on average, may be suboptimal for individual managers if heterogeneity in the operating environment creates varying compensation risk. We use field data from a retail firm that introduced an OSFA bonus compensation plan for its store managers. The common bonus formula is based on a weighted sum of objective measures of performance and a subjective rating made by supervisors. The firm intended the supervisors’ discretionary subjective rating to evaluate performance on dimensions that are difficult to measure (e.g., store appearance). We test and find that supervisors give uniformly higher subjective ratings to managers whose objective measure of sales performance is measured with greater noise, and to managers who face higher performance target difficulty, the latter assessed both prior to (ex ante) and subsequent to (ex post) the evaluation period. These results obtain after controlling for manager ability and performance, and for alternative mechanisms to mitigate differences in compensation risk (e.g., salary changes, sales target changes, and bonus adjustments). The evidence suggests that supervisors use discretion in subjective ratings to provide manager-specific risk premiums for non-executive managers who are subject to an OSFA contract

The Tone from Above:The Effect of Communicating a Supportive Regulatory Strategy on Reporting Quality

In collaboration with the Authority for the Financial Markets in the Netherlands, we manipulate the content of official letters that instruct financial intermediaries to submit a mandatory self-assessment. As part of the Registered Report Process, we submitted our hypotheses, experimental procedure, and planned statistical analyses before data collection. We predicted that a request indicating a supportive regulatory attitude has a positive effect on reporting quality on average. We also predicted this effect to be stronger for small firms and for firms with a long-term orientation, and to become negative for firms with a short-term orientation. Planned analyses show that a supportive letter reduced reporting quality unless firms had a long-term orientation, supporting the moderating influence of time horizon, but providing no support for the expected average effect or for moderation by firm size

Consensus summary report for CEPI/BC March 12–13, 2020 meeting: Assessment of risk of disease enhancement with COVID-19 vaccines

A novel coronavirus (CoV), Severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2), emerged in late 2019 in Wuhan, China and has since spread as a global pandemic. Safe and effective vaccines are thus urgently needed to reduce the significant morbidity and mortality of Coronavirus Disease 2019 (COVID-19) disease and ease the major economic impact. There has been an unprecedented rapid response by vaccine developers with now over one hundred vaccine candidates in development and at least six having reached clinical trials. However, a major challenge during rapid development is to avoid safety issues both by thoughtful vaccine design and by thorough evaluation in a timely manner. A syndrome of “disease enhancement” has been reported in the past for a few viral vaccines where those immunized suffered increased severity or death when they later encountered the virus or were found to have an increased frequency of infection. Animal models allowed scientists to determine the underlying mechanism for the former in the case of Respiratory syncytial virus (RSV) vaccine and have been utilized to design and screen new RSV vaccine candidates. Because some Middle East respiratory syndrome (MERS) and SARS-CoV-1 vaccines have shown evidence of disease enhancement in some animal models, this is a particular concern for SARS-CoV-2 vaccines. To address this challenge, the Coalition for Epidemic Preparedness Innovations (CEPI) and the Brighton Collaboration (BC) Safety Platform for Emergency vACcines (SPEAC) convened a scientific working meeting on March 12 and 13, 2020 of experts in the field of vaccine immunology and coronaviruses to consider what vaccine designs could reduce safety concerns and how animal models and immunological assessments in early clinical trials can help to assess the risk. This report summarizes the evidence presented and provides considerations for safety assessment of COVID-19 vaccine candidates in accelerated vaccine development

Partner selection and governance design in interfirm relationships

This paper develops a structural model to simultaneously analyze firms' partner selection activities and governance design for managing interfirm relationships. The model predicts these choices to be influenced by appropriation concerns, coordination requirements, dependence and prior experiences with the exchange partner. An analysis of 817 information technology transactions shows that appropriation concerns, coordination requirements and dependence influence governance design, while buyers' partner selection effort relates mainly to appropriation concerns. Partner experience developed during prior ties with the exchange partner is found to moderate the effects of these control problems. In addition, partner selection and formal governance are found to be used as complements instead of substitutes in coping with interfirm control problems.

Management Control for Market Transactions: The Relation Between Transaction Characteristics, Incomplete Contract Design, and Subsequent Performance

Using an unusually comprehensive database on 858 transactions for information technology products and accompanying services, we study how close partners who are exposed to opportunistic hazards structure and control a significant transaction. We analyze data on the terms of contracting to determine whether transaction and supplier characteristics that generate opportunistic hazards are related to the formal management control structure. We also examine whether misalignment between transaction and supplier characteristics and the control structure is associated with ex post performance problems. Characteristics associated with hazards are found to be positively related to contract extensiveness. Factor analysis of the use of 24 contract terms reveals four groups of contract terms that are commonly used in combination. We interpret these factors as "dimensions of management control" and label them: assignment of rights, product and price, after-sales service, and legal recourse. Characteristics associated with hazards are positively related to the use of all four dimensions of management control, with different hazards associated with different controls. We then examine the relation between transaction characteristics and ex post transaction problems, demonstrating that even in the presence of mutually agreeable contracts, hazards remain. We conclude that costs of contracting are associated with increased use of contract terms on assignment of rights, after-sales service, and legal recourse. Finally, we present evidence that management control structures that are better aligned with transaction hazards mitigate subsequent performance problems, though at a nontrivial cost of contracting.management control, contingency theory, transaction costs, costs of contracting, information technology

Reflecteren op presteren: Liber amicorum voor prof.dr. T.L.C.M. Groot

Gepubliceerd op 19 mei 2022