Why you should consider SEM: A guide to getting started

Structural Equation Modeling (SEM) offers researchers additional flexibility and enhanced research conclusions, yet it is still underutilized in accounting. This may be in part because many researchers are not sufficiently familiar with SEM. SEM can be difficult to apply, especially if the research study was not appropriately planned to accommodate the necessary assumptions and data requirements. This article helps researchers overcome some barriers to using SEM by providing a simple guide to effectively planning a study suitable for an SEM analysis while also suggesting references and additional reading on the topic. To further encourage the use of SEM, the practical benefits of using SEM over the traditional regression approach for some research situations are also explained. Finally, a comparison of a regression and an SEM analysis of the same data testing the same theoretical model is included in the Appendices A and B in order to compare the differences in the research conclusions obtained by the two methods of analysis. © 2006 Elsevier Ltd. All rights reserved

Impact of Post-restatement Actions Taken by a Firm on Non-professional Investors’ Credibility Perceptions

The frequency of earnings restatements has been increasing over the last decade. Restating previous earnings erodes perceived trustworthiness and competence of management, giving firms strong incentives to take actions to enhance perceived credibility of future financial reports [Farber, D. B.: 2005, The Accounting Review 80(2), 539–561.]. Using an experimental case, we examine the ability of post-restatement actions taken by a firm to positively influence non-professional investors’ perceptions of management’s financial reporting credibility. Our examination considers credibility judgments following two types of restatements – those resulting from fraud in which the character, ethics, and values of an organization may be called into question [cf. Copeland, Jr., J. E.: 2005, Accounting Horizons 19(1), 35–43.], and those resulting from non-fraud (i.e., aggressive accounting). Based on the information in the experimental case, non-professional investors take the role of potential equity investors and make a judgment about management’s financial reporting credibility after reviewing a set of post-restatement actions taken by a firm. The possible actions include changes in four corporate governance mechanisms (i.e., internal audit function, external audit firm, board of directors, CFO) and a buyback of company stock. Our results provide an important contribution to the literature by demonstrating that among non-professional investors, perceptions of management’s financial reporting credibility are affected both by the post-restatement action taken and the nature of the restatement. These results offer insight into the formation of a key credibility judgment made by non-professional investors following a trust-destroying event, an earnings restatement

Tenure-Track Opt-Outs: Leakages from the Academic Pipeline

Purpose: To understand the reasons that accounting academics leave the tenure-track academic pipeline. Design/methodology/approach: Survey study was conducted of PhD graduates who left the tenure-track accounting pipeline over a 22-year period. Findings: We located and surveyed accounting PhD graduates who have opted out of the tenure-track. These opt-outs included those who have left academia entirely and those who have moved into non-tenure-track positions. Survey results indicate that dissatisfaction with research expectations is the most significant factor for faculty now employed in non-tenure-track positions. Although there were no gender-related differences in the number of faculty who left the tenure-track but stayed in academia, there were some gender differences in the importance of family-related factors in motivating the move off of the tenure-track. Research limitations/implications: The study examines the importance of the “push” and “pull” factors associated with changing career paths in academia that have been identified in the literature. The study finds some differences in influential factors between accounting academia and other fields. Sample size is a potential limitation. Practical implications: The study provides recommendations for PhD program directors and for hiring institutions to help reduce the number of opt-outs. Social implications: Retention of qualified faculty who are dedicated teachers improves students’ educational outcomes. Originality/value: This is the first study to examine factors that drive accounting academics to opt-out of the tenure-track

Impact of Post-restatement Actions Taken by a Firm on Non-professional Investors’ Credibility Perceptions

corporate governance, credibility, restatements, trust,