On the Optimal Relation between the Properties of Managerial and Financial Reporting Systems

Abstract

We develop a theoretical model of the …rm that links properties (stewardship vs. valuation focus) of …nancial reporting regimes with the informational properties of optimal managerial accounting systems. We show that, contrary to the standard textbook proposition, properties of management and …nancial accounting systems are not independent. Signi…cantly, we provide an explicit connection between exogenous and observable properties of a …rm's …nancial reporting system and the quality of the managerial accounting system on which manager(s) base real economic decisions. As the quality of those economic decisions can also be inferred from publicly available data, our theory generates new opportunities for empirical managerial accounting research on large non-proprietary samples. Further, by being able to identify enhanced performance due to improved managerial accounting information, our theory provides opportunities to gain a better understanding of the link between particular managerial accounting practices and the quality of the information produced.Comments are certainly welcomed and can be directed to either author. We gratefully acknowledge comments and/or suggestions by

IPOs, institutional complexity, and management accounting in hybrid organisations: A field study in a state-owned enterprise in China

“…4 Extant research has examined topics such as earnings management in the context of IPOs (Aharony et al, 1993;Friedlan, 1994;Teoh et al, 1998), change in corporate governance practices triggered by IPOs (Burton et al, 2004), issues related to disclosure in IPO prospectuses (Clarkson et al, 1992;Mather, et al, 2000;Shi et al, 2013), and the effects of IPOs on the financial performance of listed companies (Jain and Kini, 1994). However, studies examining how IPOs influence the MA practices of newly listed firms are relatively rare, despite the close linkages between management accounting, financial accounting, and corporate governance (Bhimani, 2009;Hemmer and Labro, 2008;Merchant and Van der Stede, 2012).…”

“…A substantial amount of research has revealed that IPOs may trigger significant changes to the ownership structure, corporate governance, and financial reporting practices of newly listed firms (Aharony et al, 2000;Burton et al, 2004;Ernst & Young, 2008;Hung et al, 2012;Lee, 2001;Teoh et al, 1998). However, despite the close linkages between management accounting, financial accounting, and corporate governance (Bhimani, 2009;Hemmer and Labro, 2008;Merchant and Van der Stede, 2012), research into the effect of IPOs on the management accounting (MA) practices of newly listed firms is relatively limited and the findings generated so far appear inconclusive and partial. First, there is evidence that IPOs may facilitate changes in the planning and control, performance measurement, and capital budgeting of newly listed companies (Kraus and Strömsten, 2012;Von Eije et al, 2004).…”

Role of Information Technology to Choose Optimized Strategies in Management

“…[8] Given that the link between financial and management accounting information is of higher importance in financiallyoriented management control systems than in technically oriented ones, this would -once again -call for an integrated rather than a separate accounting system design. Nevertheless, how and why changes towards a financially-oriented management control system also induce changes in the management accounting system has not yet been explored (Hemmer and Labro, 2008;Lambert, 2007;Ittner and Larcker, 2001). [9] David Hurwitz (2003) discussed the challenges and opportunity of 21st century IT and the rise of portfolio management in the IT world.…”

“…There was no discussion of the technology platform and technology skill needed for supporting the IFRS based system. [11] Kim Smith (2002) focused on the effect of e-business/ecommerce as a current development in the audit and the role of the auditor in tackling internet e-com. The author claims that the auditor should perform the internet e-com audit as per any other audit of financial statements.…”

Accounting and economic concept of income

“…Staré účetní paradigma pomalu umírá a uvolňuje cestu novému. V neposlední řadě je nutné zmínit tendence prorůstání manažerského a finančního účetnictví (Hemmer a Labro, 2008), kdy i v rámci účetních závěrek určených pro potřeby externích uživatelů se zveřejňují informace používané pro vnitřní řízení a založené na tzv. manažerském přístupu (např.…”