102 research outputs found

    Audit

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    Abstract: The Elgar Encyclopedia of Nonprofit Management, Leadership and Governance is the ultimate reference guide for those interested in the rapidly growing nonprofit sector. Each insightful entry includes a definition of the concept, practical applications in nonprofit organizations, and discussion of current issues and future directions

    Value relevance of peer-based benchmarking of discretionary expenses and business strategy

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    Research on value relevance of reported selling, general and administrative expenses (SG&A) generally employs historical SG&A as reference point for assessment. This practice tends to ignore the interpretational ambiguity that surrounds the economics of SG&A expenditure and what it means for future profitability and firm value. Organizational theories stress the importance of peer-based benchmarking as an aid for assessment, especially when assessment uncertainty is high, and argue that similarity to peers holds information by lending sensibility, appropriateness and technical value to observed behaviour, thereby reducing assessment uncertainty. Using a sample of listed US firms, we investigate whether SG&A similarity to an industry-specific peer-based benchmark conveys value-relevant information, reducing information asymmetry between firms and investors. We find that only for firms with SG&A exceeding the peer-based benchmark in the previous period, SG&A similarity is associated with higher future financial performance and reduces information asymmetry between firms and investors. We also find that both contemporaneous stock returns and future firm value impound this uncertainty-reducing information conveyed by SG&A similarity. Results further show that the value-relevance of SG&A similarity mainly holds for firms with a Defender-type business strategy and firms from peer groups where business strategies are more similar

    Value relevance of peer-based benchmarking of discretionary expenses and business strategy

    No full text
    Research on value relevance of reported selling, general and administrative expenses (SG&A) generally employs historical SG&A as reference point for assessment. This practice tends to ignore the interpretational ambiguity that surrounds the economics of SG&A expenditure and what it means for future profitability and firm value. Organizational theories stress the importance of peer-based benchmarking as an aid for assessment, especially when assessment uncertainty is high, and argue that similarity to peers holds information by lending sensibility, appropriateness and technical value to observed behaviour, thereby reducing assessment uncertainty. Using a sample of listed US firms, we investigate whether SG&A similarity to an industry-specific peer-based benchmark conveys value-relevant information, reducing information asymmetry between firms and investors. We find that only for firms with SG&A exceeding the peer-based benchmark in the previous period, SG&A similarity is associated with higher future financial performance and reduces information asymmetry between firms and investors. We also find that both contemporaneous stock returns and future firm value impound this uncertainty-reducing information conveyed by SG&A similarity. Results further show that the value-relevance of SG&A similarity mainly holds for firms with a Defender-type business strategy and firms from peer groups where business strategies are more similar

    Peer-based comparison and firms' discretionary cost decisions

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    This study investigates whether firms engage in peer-based benchmarking in their decision-making regarding selling, general and administrative expenses (SG&A) for a large sample of U.S. listed firms. Peer-based comparison relates to comparing own performance against the performance of a meaningful reference group of other firms. SG&A are to a large extent discretionary, but optimal levels of (relative) SG&A are hard to assess. Based on the behavioural theory of the firm and institutional theory, we argue that peer-based comparison is likely to be an important input to managers' SG&A decision processes. Results show that peer-based comparison significantly drives changes in firms' reported SG&A. In addition, the effect of peer-based comparison is found to depend on the firm's life cycle stage. Findings further indicate that peer-based comparison has a significantly stronger effect in reference groups characterised by high(er) SG&A similarity. Results are robust to using several industry classification systems, as well as, multiple approaches to identify firm life cycles

    Peer‐based comparison and firms' discretionary cost decisions

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    status: Published onlin
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