Experiments in Management Accounting & Control

Abstract

Proper design of management accounting & control systems is paramount for organizational performance. In fact, organizational failure can often be attributed to poor design of these systems, often stemming from a limited understanding of the drivers of managerial behavior in complex organizations. A great challenge lies in understanding what are crucial design elements of control systems, what design options are feasible, and how the design and use of accounting and control systems should match the organizational context in which they operate.

This project addresses the question how an organization’s management accounting and control system should be shaped to evoke the desired behavior and decisions from managers and employees. Example topics include, but are certainly not limited to (a) evaluation procedures (b) Corporate Social Responsibility (CSR) and sustainability policies and metrics, (c) (dys)functional effects of performance measurement, target setting, and incentives, (d) optimal information processing and decision making, (e) decision making using Artificial Intelligence (AI).

The Ph.D. project aims to explore innovative research questions in this field, employing the experimental research method. The Ph.D. student will undergo rigorous training in accounting and research methods during the first year. Subsequently, the student will develop and conduct three empirical studies over the next years, potentially culminating in working papers publishable in high-quality academic journals. While enjoying substantial independence, especially during the initial phases of the project, the Ph.D. student will collaborate intensively with the members of the supervisory team.

Keywords

Management accounting, management control, performance measurement, incentives, decision making, experiments

Topic

Management Accounting & Control Systems form the bridge between the organization’s strategy and its operations. Their purpose is to align managerial behaviour and decision making with organizational goals; if this goes awry, the result can be fraud, scandals, myopia, and more generally: suboptimal performance and loss of value.

Although management controls are typically embedded in the organization’s financial management and accounting systems, their design and use should be based on a thorough understanding of how managerial behaviour is influenced by typical control system elements, such as target setting, performance measurement and rewarding. Indeed, while the proper design of management control systems is paramount for organizational performance, organizational failure can often be attributed to poor design of the organizations management control system. Such poor design may result from a limited understanding of the drivers of managerial behavior in complex organizations. Our challenge thus lies in understanding what are crucial design elements of control systems, what design options are feasible, and how the design and use of accounting and control systems should match the organizational context in which they operate.

This project addresses the question how an organization’s management accounting and control system should be shaped to evoke the desired behavior and decisions from managers and employees. There is ample room for further research in this area, regarding fundamental and current issues and trends. Example topics include, but are certainly not limited to:

(a) the role of evaluation procedures, including measurement issues and subjective assessments. While there is a relatively well-established research stream on how managers exercise discretion in evaluations and the resulting biases, little is known about the effect on employee behavior of such biased evaluations (Bol, 2011);

(b) CSR and sustainability implementation, including its signaling role and effects on behavior. For instance, studies have begun to address when CSR policies such as donations to charities increase individual effort and when not, depending on how they are implemented and/or the tone at the top (Douthit et al., 2012);

(c) performance measurement, target setting, and incentives, as well as their (dys)functional effects, such as misreporting and fraud. Research shows that the age-old plea from practice for more “transparency” in decision making is indeed often optimal, but with important exceptions where transparency and objectivity are actually hurtful. Such exceptions have been more scarcely researched, as have specific decisions such as promotions (Choi et al., 2012; Hecht et al., 2023; Hannan et al., 2013);

(d) optimizing decision making, dependent on decision procedures and performance measurement. While much of the research in the area focuses on evaluation decisions, fewer studies have focused on individual and group decision making in other contexts, including creativity, information processing, and investment decisions (Dalla Via et al., 2019; Kachelmeier et al., 2008);

(e) the role of AI in guiding decision making. Research is emerging about its benefits and risks in its implementation, such as AI-aversion (Dietvorst et al., 2015).

In short, the objective of this Ph.D. project is to identify and analyze innovative research questions in the field of management accounting & control, building on behavioral and economic theory.

The expectation is that these questions will be examined using the experimental research method (yet an exception is possible – i.e., that one research paper uses archival data).

The structure of this Ph.D project is as follows: During the first year, the Ph.D student will receive high-quality training in accounting research as well as research methods. By the end of the first year, the student will have developed an initial proposal for three empirical studies, enjoying substantial independence in selecting a research focus. Over the subsequent years, these studies will be conducted and progressively developed into three working papers, with the potential to be published in high-quality academic journals. Especially during the initial phases of the project, the Ph.D. student will collaborate intensively with the members of the supervisory team.

Approach

Experiments, potentially making use of ERIM’s experimental lab.

Required profile

The candidate is motivated to tackle crucial issues in this area, and has (a) a background in accounting, finance, economics, or psychology (b) good quantitative and communicative skills, (c) an international focus, and (d) an interest in accounting, corporate communication and/or corporate incentive schemes.

Required by ERIM

All application documents required by ERIM can be found here.

Expected output

The goal of the project is that the PhD candidate completes three research papers that are potentially publishable in leading (accounting) journals such as The Accounting Review; Accounting, Organizations & Society; Contemporary Accounting Research; Journal of Accounting Research; Management Accounting Research; and Management Science.

Cooperation

The decision whether or not to cooperate with other universities or research groups depends on future project choices, though typically such cooperation is part of the project. Furthermore, it is expected that the Ph.D. candidate will spend at least 6 months at an international university as a visiting scholar.

Societal relevance

This research project has a strong potential to influence companies’ internal communication policies and/or accounting and incentive systems, thus also improving individual decision making, organizational commitment, and/or individual and organizational performance.

Scientific relevance

The project systematically evaluates the role of management accounting & control systems  within organizations, both conceptually and empirically.

Literature references & data sources

References:

Bol, J. (2011). The Determinants and Performance Effects of Managers’ Performance Evaluation Biases. The Accounting Review 86 (5): 1549–1575.

Choi, W., Hecht, G., & Tayler, W. (2012). Lost in Translation: The Effects of Incentive Compensation on Strategy Surrogation. The Accounting Review 87 (4): 1135–1163.

Dalla Via, N., Perego, P., & Van Rinsum, M. (2019). How Accountability Type Influences Information Search Processes and Decision Quality. Accounting, Organizations and Society 75: 79–91.

Dietvorst, B., Simmons, J., & Massey, C. (2015).Algorithm Aversion: People Erroneously Avoid Algoritms After Seeing Them Err. Journal of Experimental Psychology 144 (1): 114–126.

Douthit, J., Martin, J., & McAllister, M. (2022). Charitable Contribution Matching and Effort Elicitation. The Accounting Review 97 (1): 213–232.

Hannan, R., McPhee, G, Newman, A, & Tafkov, I (2013). The Effect of Relative Performance Information on Performance and Effort Allocation in a Multi-Task Environment. The Accounting Review 88 (2): 553–575.

Hecht, G., Maas, V., & Van Rinsum, M. (2023). The Effects of Transparency and Group Incentives on Managers’ Strategic Promotion Behavior. The Accounting Review 98 (7): 239–260.

Kachelmeier, S, Reichelt, B. & Williamson, G. (2008). Measuring and Motivating Quantity, Creativity, or Both. Journal of Accounting Research 46 (2): 341–373. 

Data sources: Experimental data.

Employment conditions

ERIM offers fully-funded and salaried PhD positions, which means that accepted PhD candidates become employees (promovendi) of Erasmus University Rotterdam. Salary and benefits are in accordance with the Collective Labour Agreement for Dutch Universities (CAO).

Erasmus University Rotterdam aspires to be an equitable and inclusive community. We nurture an open culture, where everyone is supported to fulfil their full potential. We see inclusivity of talent as the basis of our successes, and the diversity of perspectives and people as a highly valued outcome. EUR provides equal opportunities to all employees and applicants regardless of gender identity or expression, sexual orientation, religion, ethnicity, age, neurodiversity, functional impairment, citizenship, or any other aspect which makes them unique. We look forward to welcoming you to our community.

Contact information

For questions regarding the PhD application and selection procedure, please check the Admissions or send us an e-mail via phdadmissions@erim.eur.nl.