Musings on Accounting Research by Steve

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Monthly Archives: November 2014

Navel gazing – getting beyond the descriptive!

While the title of this post mind sound like I object to articles that study the process of producing knowledge in accounting – I really do not object.

What I object to is atheoretical research that is based on a randomly generated and idiosyncratic set of questions driven by the authors’ personal agenda and experience.

There is an entire literature on the sociology of knowledge production and indeed one can go right to institutional theory directly to generate research questions and hypotheses.

For example
1. Are elite schools barriers to innovative research in accounting?
2. Are authors from non-elite schools more likely to believe the review process is unfair?
3. Do universities contribute to the narrowing of knowledge production through a strategy of mimicking so- called elite schools?
4. What are the effects of race, gender, etc of research production?

In other words research in what we do and how we do it should be held to the same standards as any other research.

The last post on the link between macroeconomics underpinnings and accounting research

So why do these views support my argument for paradigm diversity?

Simple – if you do not get challenged on your fundamental assumptions that you bring to your research you lose the opportunity to see if your theoretical tools and interpretations can withstand alternative views.

After all, a group of monetarists may delve into the models and data sources that a fellow researcher has taken and hence be strong quality control for the workmanship of the evidence produced! But they will not be very likely to examine whether there are alternative interpretations of the evidence that make fit the findings better!

Why not? Functional fixation. They know what they know but they cannot know about the unknowns that do not fit into their theoretical world. Unknowns that could well lead to a richer interpretation of the evidence.

Without challenge their interpretation of their research is substantially less rich!

Yet I still see accounting programs devoted to single paradigms on the basis that it provides a congenial research environment! Really!!! Is that the criteria for doing good research – to be nice!!!! If that is what you want – a nice genial work environment – may I suggest a liberal arts university with a nice business school. Critical reflection is vital for an inquiring mind and respectful paradigm diversity causes such reflection to naturally occur!

Okay, onto another hobby horse next week!

Assumptions leading to our interpretation of evidence

Last post started an analysis of how fundamental macroeconomic views effects how we approach our accounting research without many of us realizing it! I suggested that this provided a fundamental argument in favour of a more diverse set of paradigms focused on accounting research. So let’s first see how it affects the generation of research questions.

For example: accounting and auditing regulators exist – what issues arise from that observation?

The monetarist sees this as an involvement of a third party in the free capital markets and immediately focuses on the costs of regulation and pines for a truly free market where prices are fully revealing. ( of course, for prices to be fully revealing in markets externalities need to be monetized so all costs are considered – but I digress) Hence, their focus is on the costs on the regulatee assuming that the best regulation is none. Benefits are hard to measure so the focus is on costs.

The Keynesian sees a regulator’s role as trying to ensure the market is more information based so that prices, such as they are, are efficiently set based on the best obtainable information. Hence, they see costs of regulation as part of the costs of keeping up the capitalist production system. They are interested in whether people can actually interpret and apply the regulation in an effective, and to a lesser extent, efficient manner.

The critical theorist (a Keynesian in the extreme form) sees the fact that regulators tend to be “captured” over time by those they regulate and hence believe that regulations move towards being symbolic rather than substantive. They view their role as revealing ” the emperor has no clothes.” In other words show that the powerful can dominant the regulator who is tasked with preventing that.

While very simple, this analysis has attempted to show how accounting research questions get framed by our understanding of the macroeconomic world. Next post – how does it require multiple paradigms in accounting research?

Our assumptions lead our conclusions

What we assume about the world can often colour our interpretation of the evidence. That, in my opinion is the fundamental reason we need a diversity of paradigms examining accounting.

For example: I view the macroeconomic world through the lens of a Keynesian not that of a monetarist. Hence, implicitly I agree with the relatively greater emphasis on the role of government in ensuring that our capitalist economy works for all.

If I were a monetarist, then I would see the world quite differently in that I would see government as more of a problem and that freer markets are the best long run solution to keeping our capitalist economy healthy.

Yet most accounting researchers have little understanding of what basic assumptions about how the economic world works that drives their research.

How does that work you say? A monetarist believes in long lasting equilibriums that occur though relatively quick adjustments that are efficiently transmitted by markets. Hence, the assumption of efficient capital markets make intuitive sense to such a person driving their focus to a relatively narrow theoretical base of financial economics. And the way they interpret their research findings.

A Keynesian accepts the proposition that markets may be efficient in the long run but that the long run is too long to wait. Mind you the Keynesian is also much more sympathetic to Adam Smith’s view that capitalism has a tendency to lead to monopolies and that markets need to be structured ( dare I say regulated) so that does not happen ( yeah that Adam Smith – the first philosopher of capitalism – who also said corporations are inherently immoral). Thus, in addition to financial economics, that researcher understands the role of psychology (what Keynes called the “animal spirits ” of markets in his delightful British English), sociology (I.e. “Mobs” according to Keynes) as well as many fields of economic research beyond financial economics. This too affects how they interpret their research findings.

Return latter for this analysis to continue!

AOS and economics based research

Let’s remember that the title of AOS is “Accounting, Organizations and Society” when we discuss the broadening of AOS to include more economics based research.  As the last fifty years have shown, at the society level markets are very much present and indeed taking a more dominant role giving the retreat of government in the age of globalization.  It has always been a bit of a puzzle to me as to why a journal interested in the role of organizations and society would basically preclude the role of markets (except to critique them) from its research base.

Certainly I am not advocating wholesale change in emphasis at AOS.  We need a journal that presents the best in alternative to markets oriented perspectives on the accounting world.  But economics is more than the very narrow financial economics that is featured at the Journal of Accounting & Economics and the like.  AOS should take the lead in promoting a broader economic based perspective on accounting that goes well beyond the narrow financial economics perspective we are currently offered in the American Three journals.

As I said many times when I was CAR EIC, take a look at the major economics journals, even the American ones!  You will see a much broader set of economic theories and methods being represented in the American Economic Review than those that are presented in the so-called economics (really financial economics) based accounting journals.  While AOS by itself may not change doctoral programs in North America’s emphasis on their economic basis, it would be great to see those programs send students to study more than introduction to micro-economics which is often a precursor to a financial economics focused accounting doctoral program.  That would truly allow the accounting phenomena to be studied with a broader lens at the organization and society level than it currently is done by those who seek to present themselves as economics based researchers in accounting.

The continued evolution of JAR

Frankly I continue to be amazed at the ongoing changes that JAR is experiencing.  Nearly fifteen years after the “night of knives” when all psychology based accounting researchers and many analytic researchers that did not fit the “Ball”-ian criteria of doing accounting research (including most auditors, tax people, management accountants) JAR is gradually emerging as a general interest accounting journal both from a paradigmatic and a substantive accounting topic perspective.

While the trend has been a somewhat bumpy one, over the last five years gradually the journal has been publishing more experiments (including this year experiments in financial accounting, management accounting and most recently auditing). furthermore, it is beginning to publish management accounting research that delves into firms rather than explores public data bases and associates them with market variables of interest (I always have a hard time telling the difference between these studies and capital markets financial reporting studies but that is probably just me).  As near as I can tell we are getting back to a JAR that is about as open as it was when Katherine Schipper was unceremoniously dumped as Editor in the late 1990s.

Now if only JAR would become as open as it was in the 1970’s . . . . . . .  Or is that too much to hope for as JAR matures to fifty years old!

Conferences that work well!!!

The AOS Conference in Chicago is a prime example of a conference that worked well!!!!  The organizers decided to skip out of the discussant mode and adopt the conventional “Chicago school (i.e. JAR Conference)” approach of having the “discussant” be a summarizer and integrator of the thoughts of the participants about the paper as well as their own thoughts.

Thus, we got away from the highly stylized discussant comments and responses to discussant’s comments that have tended to dominate conferences that employed the traditional discussant approach.

Now, of course, this required participants in the conference to carefully read the papers in advance as they were the true discussants.  And it seemed to work well.  Everyone got to ask a series of questions when they wanted to including follow-ups. Other audience members were able to add short clarification questions as supplements to others questions!  In other words it was a true intellectual experience that lead to substantive knowledge creation which should be the goal of any of the smaller academic conferences.

Yes, I know this model will not work well at conferences featuring multiple concurrent sessions with twenty to a thousand papers being presented. but at conferences where there are less than 8 papers being presented this model should be encouraged.  At the very least we need to stop it from degenerating into a duality between the formal discussant and the author.  Else, the entire reason for small academic conferences seems to go away.

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