Papers Flashcards by Boris Philippo

What is the paper from Nelson & Kinney (1997) about?

Nelson & Kinney 1997 (WK2)
The effects of ambiguity on loss contingency reporting judgments.

The paper is about the effect of ambiguity on loss contingency reporting judgments.

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What is the result of ambiguity and a large chance of loss contingency on our assessment?

Nelson & Kinney 1997 (WK2)
The effects of ambiguity on loss contingency reporting judgments.

We assess the chance of loss contingency as smaller (conservative)

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What is the result of ambiguity and a small chance of loss contingency on our assessment?

Nelson & Kinney 1997 (WK2)
The effects of ambiguity on loss contingency reporting judgments.

We asses the chance of loss contingency as larger.

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What is loss contingency?

Nelson & Kinney 1997 (WK2)
The effects of ambiguity on loss contingency reporting judgments.

a situation where there’s a reasonable chance that an asset has lost value or that a liability has been incurred.

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When must auditors report loss contingency?

Nelson & Kinney 1997 (WK2)
The effects of ambiguity on loss contingency reporting judgments.

When loss of material amount is probable.

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The higher the ambiguity, the … the doubt

Nelson & Kinney 1997 (WK2)
The effects of ambiguity on loss contingency reporting judgments.

The higher the ambiguity, the higher the doubt.

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What is the paper from Brink & Raking 2013 (WK2) about?

Brink & Ranking 2013 (WK2)
The effects of risk preference and loss aversion on individual behavior under bonus, penalty, and combined contract frames.

The paper is about the effect of risk preferences and loss aversion on individual behavior under bonus, penalty, clawback and combined contract frames.

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What is the reason that people prefer differently framed, yet economically equivalent, incentive contract?

Brink & Ranking 2013 (WK2)
The effects of risk preference and loss aversion on individual behavior under bonus, penalty, and combined contract frames.

People have different preferences due to risk preferences and loss aversion.

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What is the order of preferences of incentive contract?

Brink & Ranking 2013 (WK2)
The effects of risk preference and loss aversion on individual behavior under bonus, penalty, and combined contract frames.

Bonus only –> bonus or penalty –> combination bonus & penalty –> Clawback

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What is the take away from the paper of Brink & Ranking 2013 about effect of risk preference and loss aversion on individual behavior under bonus, penalty, clawback and combined contract frames.

Brink & Ranking 2013 (WK2)
The effects of risk preference and loss aversion on individual behavior under bonus, penalty, and combined contract frames.

Take away is to be wary of framing. The same contract can be experienced very different based on the way it is presented.

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What did Brink & Raking 2013 research?

Brink & Ranking 2013 (WK2)
The effects of risk preference and loss aversion on individual behavior under bonus, penalty, and combined contract frames.

Researched if individuals prefer differently framed, yet economically equivalent, incentive contracts.

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What is the paper from Rose et al. 2022 (WK3) about?

Rose et al. 2022 (WK3)
Effects of uncertainty visualization on attention, arousal, and judgment

The paper is about effects of uncertainty visualization on attention, arousal and judgments.

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What do the researchers from Rose et al. 2022 (WK3) test?

Rose et al. 2022 (WK3)
Effects of uncertainty visualization on attention, arousal, and judgment

The researchers test if different visualizations of information can influence judgments in the context of uncertainty of estimations.

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What is the key take away from Rose et al. 2022 (WK3)

Rose et al. 2022 (WK3)
Effects of uncertainty visualization on attention, arousal, and judgment

Information that is more uncertain, should be relied upon less. Sometimes decision makers fail to account for uncertainty. Visualizations of uncertainty can improve judgment quality through attention and arousal.

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What is the paper from Joyce & Biddle 1981 (WK3) about?

Joyce & Biddle 1981 (WK3)
Anchoring and adjustment in probabilistic inference in auditing

Paper is about anchoring and adjustment in probabilistic inference accounting

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What does the paper Joyce & Biddle 1981 (WK3) research?

Joyce & Biddle 1981 (WK3)
Anchoring and adjustment in probabilistic inference in auditing

Anchoring and adjustment heuristics were known prior, but assumed to not influence professionals. Article applies known knowledge in a professional setting, and tests for cognitive biases.

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What are the results regarding anchoring?

Joyce & Biddle 1981 (WK3)
Anchoring and adjustment in probabilistic inference in auditing

Strong then weak –> more substantive tests
Weak then strong – > less substantive tests

Strong then weak shows bigger differences then weak then strong.

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What is the reason for the differences in strong vs weak system first?

Joyce & Biddle 1981 (WK3)
Anchoring and adjustment in probabilistic inference in auditing

Reason for difference is due to anchoring, with strong then weak order the weak becomes more noticeable.

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What is the result for the conjunctive event bias?

Joyce & Biddle 1981 (WK3)
Anchoring and adjustment in probabilistic inference in auditing

Conjunctive formulation –> higher chance
Disjunctive formulation –> lower chance.

Its about chance of auditor giving going concern statement.

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What is the paper from Chan & Thornock 2022 (WK4) about?

Chan & Thornock 2022 (WK4)
Disaggregated versus holistic performance evaluations in a promotion setting

The paper is about the impact of holistic vs disaggregated performance systems on supervisors’ subjective evaluation in a promotion setting.

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What two reasons might there be for a manager to give a better evaluations to a subordinate they want to promote?

Chan & Thornock 2022 (WK4)
Disaggregated versus holistic performance evaluations in a promotion setting

unconsciously (confirmation bias)
strategic choice (motivated reasoning)

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Under which system is it easier to bias performance evaluation?

Chan & Thornock 2022 (WK4)
Disaggregated versus holistic performance evaluations in a promotion setting

More holistic system

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Why is it harder to bias performance evaluation under a disaggregated system?

Chan & Thornock 2022 (WK4)
Disaggregated versus holistic performance evaluations in a promotion setting

It is harder because holistic gives just one score, disaggregation gives multiple. Harder to inflate performance with disaggregated, because manager needs to give arguments for every aspect.

What does promotion + holistic system result in?

Chan & Thornock 2022 (WK4)
Disaggregated versus holistic performance evaluations in a promotion setting

Higher evaluation from manager

What does promotion + disaggregated system result in ? Chan & Thornock 2022 (WK4) Disaggregated versus holistic performance evaluations in a promotion setting

Fairer evaluation compared to holistic.

What is the paper from Hribar & Yang 2016 (WK4) about? Hribar & Yang 2016 (WK4) CEO overconfidence and management forecasting

The paper is about CEO overconfidence and management forecasting.

What 3 relations are found between CEO overconfidence and management forecasting? Hribar & Yang 2016 (WK4) CEO overconfidence and management forecasting

Positive relation: overconfidence & likelihood issue Positive relation: overconfidence & optimism in range Negative relation: overconfidence & width of range

What does overconfidence result in for likelihood, optimism, and width? Hribar & Yang 2016 (WK4) CEO overconfidence and management forecasting

Overconfidence leads to a higher likelihood of issuing a management earnings forecast, more optimism in the forecasts, and a narrower width of the range in the forecast.

What does the paper of Hannan et al. 2012 (WK5) test? Title: The effect of relative performance information on performance and effort allocation in a multitask environment.

The paper tests how relative performance information (RPI) affects employee performance and allocation of effort across tasks in a multi-task environment.

How is the study set up in Hannan et al. 2012 (wk5)? Title: The effect of relative performance information on performance and effort allocation in a multitask environment.

The respondents have to complete tasks (RPI measure) divided in two disciplines. One groups gets a 50/50 time allocation and the other group is free to allocate their time.

What are the results regarding RPI and performance? Hannan et al. 2012 (WK5) Title: The effect of relative performance information on performance and effort allocation in a multitask environment.

Private RPI leads to an increase in performance over no RPI, public RPI to an even bigger increase.

What is are the results regarding RPI and time allocation? Hannan et al. 2012 (WK5) Title: The effect of relative performance information on performance and effort allocation in a multitask environment.

With no RPI people allocate their time 50/50, with private RPI there is a shift, with public RPI an even bigger shift. The shift can be suboptimal from a company perspective.

What is the reason that RPI has an effect? Hannan et al. 2012 (WK5) Title: The effect of relative performance information on performance and effort allocation in a multitask environment.

Social comparison process

What is an implication for accountants regarding RPI? Hannan et al. 2012 (WK5) Title: The effect of relative performance information on performance and effort allocation in a multitask environment.

If the firm is able to control how employees allocate their efforts across tasks, RPI is likely to increase performance.

What does this paper examine? Koonce et al. 2015 (WK5) Title: The effects of norms on investor reactions to derivative use.

This paper examines how investors react to a company's use of derivatives for risk management in light of information and firm norms. The paper tests how much blame is put on management by investors (stock price measure) in the event of losses due to hedging.

What are the results regarding hedging and norms? Koonce et al. 2015 (WK5) Title: The effects of norms on investor reactions to derivative use.

Deviating from the norm is punished more heavily by investors than not deviating in the event of losses. Deviation from industry norm is punished more strongly than deviation from firm norm.

What is the justification given for investor blame with norms in the event of hedging? Koonce et al. 2015 (WK5) Title: The effects of norms on investor reactions to derivative use.

It's harder to justify management decisions under deviation from the norm.

What is an important lesson regarding norms? Koonce et al. 2015 (WK5) Title: The effects of norms on investor reactions to derivative use.

Deviating from the norm, means you will be punished more for this behavior than if you confirmed to the norm (in the event of losses).

What is the paper about? Brown 2014 (WK6) Advantageous comparison and rationalization of earnings management.

Research is about managers' belief regarding earnings management. SEC publishes egregious examples of EM to try to sway managers to not commit EM. Results of paper show this might not be effective.

What was the study design? Brown 2014 (WK6) Advantageous comparison and rationalization of earnings management.

Two groups, choice and no choice Divided further by egregious example, similar example and a unrelated example.

What are the results regarding respondents who choose to commit EM? Brown 2014 (WK6) Advantageous comparison and rationalization of earnings management.

Respondents use the egregious example as a benchmark to rationalize their own, less severe, EM through advantageous comparison.

What are the results regarding respondents who were not given a choice? Brown 2014 (WK6) Advantageous comparison and rationalization of earnings management.

Viewing the egregious example did not impact the no choice group's perception of earnings management acceptibility.

What are the results regarding the norms being changed? Brown 2014 (WK6) Advantageous comparison and rationalization of earnings management.

There is no support that publishing examples changes the norm of how acceptable EM is. However, managers may conclude that their own behavior was relatively appropriate by comparison

What is required to use egregious examples of EM as a benchmark? Brown 2014 (WK6) Advantageous comparison and rationalization of earnings management.

The action of committing EM is required to use an egregious example as an excuse.

What is this paper about? Paper Church et al. 2012 (WK6) Shared interest and honesty in budget reporting

The paper is about honesty of managers' budget reports when the financial benefit resulting from budgetary slack is shared by the manager and assistant, and if preferences of assistant has any impact.

What is the research set up? Paper Church et al. 2012 (WK6) Shared interest and honesty in budget reporting

There is a group that shares the benefits and a group that does not share. This group is further divided by assistant knowing or not knowing. Final divide is assistants preference for honesty or money from slack.

What are the results for shared benefits? Paper Church et al. 2012 (WK6) Shared interest and honesty in budget reporting

Shared benefits increase slack: when the benefits of slack are shared, managers create more slack, finding it easier to justify their actions.

What are the results for assistant awareness? Paper Church et al. 2012 (WK6) Shared interest and honesty in budget reporting

When assistants know about the slack, the amount of slack created is slightly lower.

What are the results for assistants' preferences? Paper Church et al. 2012 (WK6) Shared interest and honesty in budget reporting

When assistant prefers money, managers are less honest (more slack) When assistant prefers honesty, the manager is more honest (less slack)

What leads to the highest slack condition? Paper Church et al. 2012 (WK6) Shared interest and honesty in budget reporting

Highest slack condition: the greatest amount of slack occurs when benefits are shared and the assistant prefers monetary gain.

What are the results regarding differences between users and auditors? Nelson & Kinney 1997 (WK2) The effects of ambiguity on loss contingency reporting judgments.

Financial statement users react more conservatively on average to ambiguity than auditors. They switch between conservative to unconservative at a greater probability.

How can attention on uncertainty information be increased? Rose et al. 2022 (WK3) Effects of uncertainty visualization on attention, arousal, and judgment

Visualization of uncertainty information can increase attention on these items compared to textual depiction.

What is the consideration that firms need to take into account regarding holistic vs disaggregated systems? Chan & Thornock 2022 (WK4) Disaggregated versus holistic performance evaluations in a promotion setting

Holistic nudges managers to promote candidate best suited for promotion, but disaggregated is fairer.

What does the paper provide insights in? Hribar & Yang 2016 (WK4) CEO overconfidence and management forecasting

The study provides insights into why managers miss their own forecasts when the costs of failing to meet their own targets is so high.

What is the effect on managers with shared slack? Paper Church et al. 2012 (WK6) Shared interest and honesty in budget reporting

Shared benefits make slack more self-justifiable to the manager.

What is the implication for organizations? Paper Church et al. 2012 (WK6) Shared interest and honesty in budget reporting

If organizations can build an ethical organization environment in which most employees live up to prosocial moral principles, it would be difficult for managers to justify potential opportunistic behavior.