07/08/2011

Thomas Ahrens, United Arab Emirates University

THEORISING ACCOUNTING RESEARCH: FOR EXAMPLE, HOW TO USE THE PRACTICE TURN IN SOCIAL SCIENCE TO CONDUCT CORPORATE GOVERNANCE RESEARCH

Overview. A short introduction and a long example

1. Theory in accounting research 2. Research objective & motivation 3. The practice turn
in the social sciences ...in management accounting with 4 major schools Lessons for corporate governance

4. A practices of corporate governance and

management accounting research agenda 5. Conclusions

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Theory in accounting research

Is there an accounting theory? A theory is a set of general or abstract

statements. Extensive borrowing from

Economics & information economics Psychology Sociology Institutional theory Organisational theory Anthropology

Theories, research questions & new insights

Theories provide focal points that order the data They respond to research questions but also

suggest research questions and concerns Is it true? Is it NEW?

are both functions on the research questions and

theories that were used in the research

Theory is essential to all research because it

explains the novelty & significance of the research

But good theory is not found arbitrarily

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Theory relevance
Theory needs to capture the phenomenon
Gunin-Paracini & Gendron (CPA, 2010) on parallels

between auditors and scapegoats McCracken, Salterio & Gibbins (AOS, 2008) on the auditorclient negotiation of financial reporting Ahrens & Chapman (AOS, 2007) on the functioning of performance measurement systems

The relevance of some (economic) theories is taken for granted but what matters really is the relevance of a particular theory to specific data Theories can be parsimonious or rich Theories grow out of intellectual and other contexts (and spread and mutate)

Research Objective

Use the practice turn in management accounting

research to generate suggestions for connecting the study of control in the fields of management accounting and corporate governance

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Motivation
Management accounting and corporate governance are concerned with organisational control There is some overlap between strategic control and management accounting, and the strategic agenda setting and policy making of corporate governance

The CMA scorecard for boards

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CIMA

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back to Motivation
Management accounting and corporate governance are concerned with organisational control There is some overlap between strategic control and management accounting, and the strategic agenda setting and policy making of corporate governance The corporate governance literature has focused on structural elements of control By contrast, a substantial part of the management accounting literature has included process & accounting in action how?

3 The practice turn in the social sciences

Action to the fore, but recognise order Overcome action versus structure
Practices themselves contain what structures them

Practices become the key social fact to study Diverse theorising, but

Practices are minimally defined as arrays of activity Practices are embodied and mindful Practical understandings and skills are shared Practices are mediated by material environments Practices are not just local

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The practice turn in management accounting

Management accounting as self-ordering

practice
Accounting systems and systems of accountability
Governmentality Actor Network Theory (ANT) Situated Functionality

Accounting systems and systems of accountability

Organisational consequences of the uses of

accounting systems in hierachies Vertical and lateral information flows and accountabilities Modifications of practice ongoing in practice References to Giddens

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Governmentality
Draws on Foucault Capillaries of power & power through, not over Disciplining of subjects to develop the mentality

to be governed (through accounting) Emphasis on blueprints for governing

Actor Network Theory (ANT)

Extremely flat ontology devoid of structures Actors are network effects, must leave traces Deconstructive overtones

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Situated functionality
Perceived

functionality of management accounting, given certain objectives

Some lessons for corporate governance research

So far corporate governance has been mostly

about incentives for individuals, but in practice

Not about individuals but how actions make up

practices Not about how individuals make decisions under the influence of so-called institutional logics but how practices are determined Not about transplanting schemes and designs from powerful centres to compliant peripheries but an active reworking of what is suggested

Creating shared resources in practice for practice

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4 A practices of corporate governance and management accounting research agenda

Suggest 3 fields of study
Risk management Environmental management accounting (EMA) Corporate responsibility & sustainability reporting

Discuss how one might study the relations

between management accounting and corporate governance knowing what we know from the practice turn in management accounting

Conceptual foci
Schatzkis 3 determinants of practice
Intentions, Rules, Practical understandings

Meshing of different practices Reworking of shared resources to develop the

practice (situated functionality) Practical intelligibility Meta-practice aspects (management control systems as structures of intentionality)
but management themselves subject to corporate

governance

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Fields x conceptual foci

Risk management Intentions of the practice Rules of the practice Practical understandings Meshing of different practices Reworking of shared resources to develop the practice (situated functionality) Practical intelligibility Meta-practice aspects (MCS as structures of intentionality) EMA Corporate responsibility & sustainability reporting

Four ideal types of risk management (Mikes 2009)

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Risk management Intentions of the practice Rules of the practice Document risk; cap risk; manage risk; trade off risks and returns; reputation SOX; stock exchange rules; professional rules and guidelines; COSO; rating rules; financial regulation; Cadbury How to calculate & present risk; influence behaviour Organisational division of labour; VBM; risk silo management; economic capital; credit rating

Practical understandings Meshing of different practices

Reworking of shared resources to develop the practice (situated functionality) Practical intelligibility
Meta-practice aspects (MCS as structures of intentionality)

Experiment with risk categories; learning about the beast; risk reviews; reform internal cap.alloc. Impress rating agencies; quantitative scepticism
Board strategy; compliance of organisational units; limit growth

IFACs EMA definition

the management of environmental and

economic performance through the development and implementation of appropriate environment-related accounting systems and practices. While this may include reporting and auditing in some companies, environmental management accounting typically involves life-cycle costing, full-cost accounting, benefits assessment, and strategic planning for environmental management (IFAC, 2005, p.19).

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Fluoride emissions & limits

Fluoride flow, aluminum smelter

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Statistical representation of roof vent emissions during the anode change shifts in kgFt/tAl (cassette results) (SUP = supervision)

Evolution of the emission results from the anode change shift on the reference and the trial sections

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EMA Intentions of the practice Rules of the practice Environmental management through accounting Environmental laws; accounting guidelines; ISO; IPPC; BREF; OSPAR; IAI How to trace & measure loss of fluoride Technical measurement; financial measurement; regulation; capital budgeting; environmental reporting

Practical understandings Meshing of different practices

Reworking of shared resources to develop the practice (situated functionality) Practical intelligibility
Meta-practice aspects (MCS as structures of intentionality)

Invent technical devices; change technical and operational procedures; assign supervisors Adjust production to pollute up to the maximum allowed
Attention to detail in operating procedures; pollution consciousness

BT, connected reporting

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BT buyer questionnaires
Guard reputation proactively Improvement planning Information sharing with other buyer companies

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Intentions of the practice Rules of the practice

Corporate responsibility & sustainability reporting Measure, report, and improve sustainability of corporate activities ISO26000 on sustainability

Practical understandings Meshing of different practices

How to find & present data; influence behaviour Customer acceptance; public reputation; product strategies; risk management; around supplier questionnaire

Reworking of shared resources to Combine KPIs with financial values; develop the practice (situated distribute KPIs through annual report functionality) Practical intelligibility Appear as an attractive investment and esteemed corporation Meta-practice aspects (MCS as structures of intentionality) Supplier questionnaire; embed peoples brand efforts

Risk management Intentions of the practice

EMA

Document risk; cap risk; Environmental manage risk; trade off risks management through and returns; reputation accounting SOX; stock exchange rules; professional rules and guidelines; COSO; rating rules; financial regulation; Cadbury How to calculate & present risk; influence behaviour Organisational division of labour; VBM; risk silo management; economic capital; credit rating Experiment with risk categories; learning about the beast; risk reviews; reform internal cap.alloc. Impress rating agencies; quantitative scepticism Environmental laws; accounting guidelines; ISO; IPPC; BREF; OSPAR; IAI How to trace & measure loss of fluoride Technical measurement; financial measurement; regulation; capital budgeting; environmental reporting Invent technical devices; change technical and operational procedures; assign supervisors Adjust production to pollute up to the maximum allowed

Corporate responsibility & sustainability reporting Measure, report, and improve sustainability of corporate activities ISO26000 on sustainability

Rules of the practice

Practical understandings Meshing of different practices

How to find & present data; influence behaviour Customer acceptance; public reputation; product strategies; risk management; around supplier questionnaire Combine KPIs with financial values; distribute KPIs through annual report Appear as an attractive investment and esteemed corporation Supplier questionnaire; embed peoples brand efforts

Reworking of shared resources to develop the practice (situated functionality) Practical intelligibility

Meta-practice aspects (MCS as structures of intentionality)

Board strategy; compliance Attention to detail in of organisational units; operating procedures; limit growth pollution consciousness

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Conclusions
of management accounting and control in corporate governance
Show strategic significance of management accounting Without simply calling for more transparency through

Practice turn offers new resources to study diverse forms

management accounting, risk management, etc

Weakly formed practices direct attention to their

meshing with other practices

Need to learn more about how corporate governance

Homo/heterogeneity and flexibility of practices

practitioners draw on shared resources and change them in the process compliance and volition

Opportunities for shared learning in a field that exhibits

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