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Overconfident managers overestimate future returns from their firms' investments. Thus, we predict that overconfident managers will tend to delay loss recognition and generally use less conservative accounting. Furthermore, we test whether external monitoring helps to mitigate this effect. Using measures of both conditional and unconditional conservatism respectively, we find robust evidence of a negative relation between CEO overconfidence and accounting conservatism. We further find that external monitoring does not appear to mitigate this effect. Our findings add to the growing literature on overconfidence and complement the findings by Schrand and Zechman [2011] that overconfidence affects financial reporting behavior.

Using a new database that contains accounting data for a large sample of U.S. private firms, we provide an investigation of financial reporting quality (FRQ) of U.S. private versus public firms. We find that in general public firms have higher accrual quality and are more conservative. The results are consistent with public firms' reporting reflecting greater demand for financial information. However, these reporting qualities of public firms are mitigated or eliminated in settings where public firms are more likely to manage earnings or face reduced demand for their financial information. Our study contributes not only to the current debate on private versus public financial accounting, but also to the broader literature attempting to understand the determinants of FRQ.

PurposeThe purpose of this paper is to better understand management accounting automation by exploring the programmability of management accounting work.Design/methodology/approachWe build upon the literature on digitalization in management accounting and draw upon the pragmatic constructivist methodology to understand how digitalization takes place at the individual actors' level in accounting practice. The paper uses a data set from an interventionist case study of a machinery manufacturer.FindingsWe examine an actual process of automating management accounting tasks. During this development process, surprisingly, calculation tasks remained more fit for humans than machines though, initially, they were thought to be programmable.Research limitations/implicationsAccording to our findings, practitioners may interpret experts' nonprogrammable work tasks as programmable and seek to automate them. Only identifying the factual possibilities for automating accounting-related work can lead to automation-improved efficiency. Our findings can be increasingly relevant for advanced analytics initiatives and applications within management accounting (e.g. robotic process automation, big data, machine learning and artificial intelligence).Practical implicationsPractitioners need to carefully analyze the entity they wish to automate and understand the factual possibilities of using and maintaining the planned automatic system throughout its life cycle.Originality/valueThe paper shows that when processes are assessed from a distance, the nonprogrammable management accounting tasks and expertise can become misinterpreted as programmable, and the goal of automating them has little chance of success. It also shows possibilities for human accountants to remain relevant in comparison to machines and paves the way for further studies on advanced decision technologies in management accounting.

We outline several properties of IFRS that potentially affect the contractibility or the transparency of financial statement information, and hence the use of that information in debt contracts. Those properties include the increased choice among accounting rules IFRS gives to managers, enhanced rule-making uncertainty, and increased emphasis on fair value accounting. Consistent with reduced contractibility of IFRS financial statement information, we find a significant reduction in accounting-based debt covenants following mandatory IFRS adoption. The reduction in accounting covenant use is associated with measures of the difference between prior domestic standards and IFRS. Because IFRS adoption changed financial reporting in many ways simultaneously, it is difficult to trace the decline in accounting covenant use to individual IFRS properties, though we report larger declines in accounting covenant use in banks, which have a higher proportion of assets and liabilities that are fair-valued. Our findings are better explained by reduced contractibility than by increased transparency, which would predict reduced nonaccounting covenant use as well, whereas we observe increases. Overall, we conclude that IFRS rules sacrifice debt contracting usefulness to achieve other objectives, such as provision of accounting information relevant to valuation.

Purpose This paper aims to define and measure the environmental capabilities that are applied when the circular economy (CE) is introduced in businesses. Founded on the dynamic capabilities theoretical approach, the study analyzes different environmental competences that firms apply during this process. Environmental management systems, corporate social responsibility, reporting and accountability and other environmental accounting practices are studied in the same analytical framework used to study the environmental capabilities that influence the circular scope (CS) of firms. This study contributes to bridging the gap between academic research focused on environmental accounting and that investigating the introduction of the CE in businesses. Design/methodology/approach The results were obtained by using partial least squares structural equation modeling to analyze the relationship between environmental capabilities for the CE and the CS achieved by a sample of Spanish firms with more than 50 employees that expressed interest in the CE, eco-design, eco-innovation and other environmental issues. Findings Based on an analysis using the dynamic capabilities theoretical approach, the results suggest a positive relationship between the CS of firms, their environmental accounting practices and their level of corporate social responsibility (CSR) and accountability. Stakeholders’ pressure – which has a mediating effect on the CS of firms – is also analyzed, adding new insights to recent studies of this topic at the micro-level. The authors also explore whether the CS of businesses, which is related to the degree of their development of capabilities, influences environmental and financial performance. Practical implications The new insights obtained in this study can help overcome the limitations of conventional accounting approaches and incorporates a much broader scale of environmental information that can be applied to CE practices. These results also offer insights to practitioners regarding the internal measurement processes related to the CE and regarding CSR in particular for small and medium enterprises, because these metrics can be partially applied depending on the practices introduced in each firm. For policymakers, a better understanding of the CE’s introduction into businesses will contribute to the design of policies that can enhance its deployment, for example, by providing tools that set up regional priorities depending on the CE-related practices adopted by the firms located in the territory. Social implications A CE involves the transformation of a linear economic model into a circular one to reduce dependence on raw materials and energy and to reduce the environmental impact of production and consumption. Understanding how to manage the specific competences that integrate capabilities applied to the CE will allow firms to improve their social and environmental reporting. In addition, other social implications of this study relate to improving relationships with consumers and stakeholders and to the practice of social corporate sustainability. Originality/value This study goes beyond previous research on the CE to extend the authors’ knowledge about its adoption at the micro-level by taking a transversal approach, as its subject spans the fields of environmental accounting and the CE while addressing both in a framework of analysis. The analysis of the accounting concerns of the CE in businesses and the study of concerns related to endogenous environmental competences are quite original under the theoretical framework of dynamic capabilities, and this study is a first step in an incipient line of inquiry.

SFAS 142 requires managers to estimate the current fair value of goodwill to determine goodwill write-offs. In promulgating the standard, the FASB predicted that managers will, on average, use the fair-value estimates to convey private information on future cash flows. The current fair value of goodwill is unverifiable because it depends in part on management’s future actions (including managers’ conceptualization and implementation of firm strategy). Agency theory predicts managers will, on average, use the unverifiable discretion in SFAS 142 consistent with private incentives. We test these hypotheses in a sample of firms with market indications of goodwill impairment. Our evidence, while consistent with some agency-theory based predictions, does not confirm the private information hypothesis.

The use of more or less positive language in corporate disclosures has been the subject of increased interest in the academic literature. We add to this stream of research by examining whether there is a manager-specific component in the tone of earnings-announcement related conference calls. We find that the tone of conference calls that is not explained by current performance, future performance, and strategic incentives has a significant manager-specific component. We also find that tone is significantly associated with manager-specific factors such as early career experiences and involvement in charitable organizations. Taken together, our findings indicate that, in addition to reflecting current and future performance, the tone of conference calls is significantly influenced by a manager-specific tendency to be optimistic or pessimistic. We also find some evidence of a manager-specific component to conference call returns, which is consistent with manager-specific optimism impacting investors’ interpretation of disclosures made in conference calls.

PurposeThe purpose of this paper is to explore the utilization of the social network, Facebook, as an instrument of stakeholder engagement and dialogic accounting in American charitable foundations, specifically non-profit organizations that are dedicated to philanthropy.Design/methodology/approachThe research motivation involves whether online interaction through Facebook could represent a channel of dialogic accounting that engages organizational stakeholders. This paper aims to understand if this dialogue is geared to generate a consensus necessary to deliberate over decisions that are shared between all stakeholders, or if a divergent and agonistic perspective, which highlights struggles and differences between actors, prevails. The present study employs a form of content analysis that takes into account the Facebook pages of the 100 largest American philanthropic foundations.FindingsThe primary goal of the analysis is to examine the discrepancies in terms of how (and how much) large organizations are using Facebook. The study wants to provide more details on which kind of information large organizations are willing to disclose and collect on Facebook, and to evaluate the level and type of interaction between foundations and users.Research limitations/implicationsFurther research could build on the present study by providing in-depth case studies and extending the analysis to other social media and other types of organizations.Originality/valueSocial media represent a powerful mechanism to engage stakeholders in a polylogic conversation. However, the scholarly literature confirms that further studies are necessary to understand how companies and organization can exploit this potential.

Currently, many enterprises face issues in budget management, such as superficial budgeting, lax execution, and insufficient feedback, leaving the mechanism linking budgetary control and financial performance unclear. Drawing on management accounting and financial management theories, this study constructs a research model encompassing direct, mediating, and moderating effects and conducts a quantitative empirical analysis using Russian enterprises as the research sample. Empirical analyses are conducted using both publicly available data from the Russian Financial Statements Database (RFSD) (https://github.com/irlcode/RFSD) and the collected survey data. In terms of variable measurement, budget control is evaluated across three dimensions-budget formulation, execution, and feedback-with mean scores ranging from 3.7 to 3.9, indicating that most enterprises place considerable emphasis on the establishment of budgeting systems. The mean financial performance score ranges from 3.5 to 3.6, suggesting a moderately favorable performance level. Empirical results reveal a significant positive correlation between budget control and financial performance (r > 0.5). In the regression model, the coefficient of budget control is significantly positive, and the explanatory power of the model increases from 0.183 to 0.361 after incorporating budget control, confirming its direct contribution to performance improvement. Further mediation analysis indicates that resource allocation efficiency and internal management processes serve as significant intermediaries between budget control and financial performance, with indirect effects accounting for 29.4% of the total effect. This suggests that budget control primarily enhances performance indirectly by improving internal management mechanisms. The moderation analysis shows that, within the Russian institutional environment, firm size and governance structure strengthen the positive impact of budget control, whereas external environmental uncertainty weakens it. These findings provide empirical evidence for understanding the performance effects of budget control under specific institutional and economic contexts and offer practical guidance for optimizing budget management in Russian enterprises and other transitional economies.

The restoration of tidal wetland and seagrass systems has the potential for significant greenhouse gas benefits, but project-level accounting procedures have not been available at an international scale. In this paper, we describe the Verified Carbon Standard Methodology for Tidal Wetland and Seagrass Restoration, which provides greenhouse gas accounting procedures for marsh, mangrove, tidal forested wetland, and seagrasses systems across a diversity of geomorphic conditions and restoration techniques. We discuss and critique the essential science and policy elements of the methodology and underlying knowledge gaps. We developed a method for estimating mineral-protected (recalcitrant) allochthonous carbon in tidal wetland systems using field-collected soils data and literature-derived default values of the recalcitrant carbon that accompanies mineral deposition. We provided default values for methane emissions from polyhaline soils but did not provide default values for freshwater, oligohaline, and mesohaline soils due to high variability of emissions in these systems. Additional topics covered are soil carbon sequestration default values, soil carbon fate following erosion, avoided losses in organic and mineral soils, nitrous oxide emissions, soil profile sampling methods, sample size, prescribed fire, additionality, and leakage. Knowledge gaps that limit the application of the methodology include the estimation of CH₄ emissions from fresh and brackish tidal wetlands, lack of validation of our approach for the estimation of recalcitrant allochthonous carbon, understanding of carbon oxidation rates following drainage of mineral tidal wetland soils, estimation of the effects of prescribed fire on soil carbon stocks, and the analysis of additionality for projects outside of the USA.