This paper investigates how non-financial performance measures (NPMs) can be used to encourage cooperation across divisions. The implementation of a project often requires joint efforts by multiple divisions. However, privately informed division managers sometimes find it in their self-interest...

This field study examines reasons for the non-adoption of post-completion auditing (PCA) of capital investments. The empirical evidence is based primarily on interviews conducted in the 30 largest Finnish manufacturing companies. PCA can be briefly described as a formal process that checks the...

We use an experiment to investigate the efficacy of a non-binding budgetary announcement made by an owner in order to mitigate a management control problem induced by asymmetric information. The owner's announcement indicates how much funding she will provide for each possible cost report by the...

Avoiding continued investment in poorly performing projects is an important function of management control systems. However, prior research suggests that managers fail to use accounting information indicating that a project is performing poorly to discontinue it; that is, they escalate...

Agents may propose bad projects because they unwittingly rely on defective prior knowledge. Concern about these honest mistakes encourages principals to examine track records of the agents' use of the same prior knowledge. But, such track records cannot exist for novel projects (or routine...

Accounting involves assigning numbers to events-quantifying them. Conventional wisdom holds that putting numbers to an argument enhances its persuasive power. However, little scholarly evidence exists to support or refute this claim, in accounting or elsewhere. In this paper, we develop an...

Firms routinely allocate the costs of common corporate resources down to divisions. This paper explores cost allocation rules that induce efficient capital investments by these divisions. It examines efficient allocation rules that satisfy properties of actual rules used in practice, namely...

The paper discusses common mistakes made by financial profession when valuating cash flows by applying inconsistent weighted average discount rates to cash flows to equity, to unlevered firm, to levered firm or other complex cash flows not regarding their type (constant or growing perpetuities,...

I identify three sources of risk for the tax shields: two of them associated to the risk of debt and one associated to the operating risk. I present a set of conditions for defining risky debt associated to cash flow and not to accounting earnings. I explain why realization of tax shields for...

This article (1) identifies three sources of risk for tax shields (TS): Two of them are associated with debt risk and one is associated with operating risk. (2) A set of conditions for defining risky debt associated with cash flow, not with earnings, is presented. (3) It further shows that...