Matthias D. Mahlendorf

The Impact of Changes in Regulation on Cost Behavior

This study examines whether introduction of fixed-price regulation influences firms to increase the elasticity of their cost structures and to reduce the asymmetric behavior of cost in response to changes in volume. It also examines variations in the extent of such responses arising from differences in institutional constraints on the flexibility to make adjustments. We posit that introduction of fixed-price regulation results in cost pressures and a concomitant increase in the operating risk faced by firms. In response, firms will attempt to influence their cost structures by increasing their cost elasticity (i.e., the response of cost to changes in volume) and by reducing their cost asymmetry (i.e., the differential response of cost to decreases in volume relative to increases in volume). We empirically test these predictions using 16,186 hospital-year observations from the German hospital industry for the years 1993–2008. Our results indicate that fixed-price regulation increases cost elasticity and decreases cost asymmetry. Consistent with the tenets of institutional theory, the strength of response to regulation is stronger in for-profit hospitals, which have greater flexibility to make adjustments to their cost structures, compared to nonprofit or government hospitals. These results hold after controlling for economic and hospital-specific factors. Thus, economic as well as sociological aspects influence cost structure responses to regulatory changes.

The ABC for Studying the Too-Much-of-a-Good-Thing Effect A Competitive Mediation Framework Linking Antecedents, Benefits, and Costs

The too-much-of-a-good-thing (TMGT) effect occurs when an initially positive relation between an antecedent and a desirable outcome variable turns negative when the underlying ordinarily beneficial antecedent is taken too far, such that the overall relation becomes nonmonotonic. The presence of the TMGT effect incites serious concerns about the validity of linearly specified empirical models. Recent research posited that the TMGT effect is omnipresent, due to an overarching meta-theoretical principle. Drawing on the competitive mediation approach, the authors of the present study suggest an antecedent-benefit-cost (ABC) framework that explains the TMGT effect as a frequent but not omnipresent issue in empirical research and integrates a variety of linear and nonlinear relationships. The ABC framework clarifies important conceptual and empirical issues surrounding the TMGT effect and facilitates the choice between linear and curvilinear models. To avoid serious methodological pitfalls, future studies with desirable outcome variables such as, for example, task performance, job performance, firm performance, satisfaction, team innovation, leadership effectiveness, or individual creativity should consider the ABC framework.

Budgeting in Times of Economic Crisis

This paper examines how corporate reliance on budgets is affected by major changes in the economic environment. We combine survey and archival data from the economic crisis that began in 2008. The results indicate that, as a result of the economic crisis, budgeting became more important for planning and resource allocation but less important for performance evaluation. Additional evidence from interviews and data gathered in a focus group further illustrate these results and show the changes organizations have introduced to respond to the economic crisis. Taken together, and contrary to more general conclusions from the literature such as an overall increase or decrease in the importance of budgeting, we find that companies emphasize certain budgeting functions over others during economic crises.

Influencing foreign subsidiary decisions through headquarter performance measurement systems

Purpose – This paper aims to investigate the ability of performance measurement systems (PMS) that were implemented by headquarters at foreign subsidiaries to influence decisions made by the subsidiary. This is important because PMS are important control mechanisms in the relationship between headquarters and subsidiaries within multinational firms.Design/methodology/approach – Acknowledging that controlling foreign subsidiaries is particularly challenging when they are geographically distant to headquarters, the authors collect survey‐based data from Chinese subsidiaries of multinational firms. They develop several hypotheses which are tested on a sample of 148 subsidiaries using multiple regression analysis.Findings – The results suggest that the influence of headquarter‐designed PMS on subsidiary decisions is higher when the compensation of subsidiary management is linked to PMS, when additional formal control is enforced, when PMS are affected by external events, when PMS are comprehensive, and when s...

Management Accountants’ Occupational Prestige Within the Company: A Social Identity Theory Perspective

Abstract Professional associations and researchers in management accounting have attempted to increase the prestige of management accountants. Although studies have suggested that occupational prestige is important, the prestige of management accountants within the employing organisation and its consequences are still not fully understood. Building on social identity theory, we investigate the effect of occupational prestige, as perceived by management accountants, on organisational–professional conflict. We suggest that prestige can mitigate conflict because management accountants with high prestige will identify more strongly with their organisation, as they see it as a source of self-esteem and might believe that they are taken more seriously by managers. At the same time, we hypothesise that prestige exerts an indirect conflict-increasing effect via professional identification. This is based on the idea that prestige may cause proud management accountants to start to identify more strongly with their profession and become hard-liners, unwilling to compromise the values associated with their profession in the interest of the firm. Results from a series of three surveys support the indirect conflict-increasing effect. Moreover, the results suggest a direct conflict-reducing effect of perceived prestige. The implications for research and practice are discussed.

Antecedents of Participative Budgeting – A Review of Empirical Evidence

Abstract Purpose Participative budgeting is one of the most intensively researched budgeting variables in management accounting. Research has stalled, however. The purpose of this paper is to stimulate further research by providing an overview of antecedents of participative budgeting and suggesting ways to build upon extant research. Methodology/approach We assess 22 studies published prior to 2011 that offer statistical insights into why organizations use participative budgeting by theorizing and modeling it as a dependent variable. Findings This work answers two research questions regarding why organizations use participative budgeting: (a) Which antecedents of participative budgeting have been analyzed so far? (b) Which causal-model forms are used in extant research regarding the antecedents of participative budgeting? Originality/value This paper provides a detailed overview of empirical studies and respective findings aiming to explain why organizations use participative budgeting. Many prior studies have measured the association between contextual antecedents and participative budgeting. However, from a theoretical perspective, objectives of employees and supervisors are often used to explain the relation. Based on our literature review, we propose that all objectives identified so far intervene in the relationship between context and use of participative budgeting and also further detail these objectives. Consequently, our review analyzes the status quo of research on why organizations use participative budgeting and adds additional suggestions of underlying causal processes that can be tested in future studies.

How Self-Justification Indirectly Drives Escalation of Commitment

Self-justification is the most examined and empirically supported explanation of escalation of commitment. Based on motivated reasoning theory, we argue that the need for self-justification affects escalation of commitment indirectly via other cognitive processes. We suggest that the need for self-justification represents a strong motivation for the continuation of a failing project. Thus, it influences the decision maker’s selective perception, sunk cost effect, and overoptimism, which in turn foster escalation of commitment. We investigate escalation in the venture capital industry and thereby — in addition to our theoretical contribution — strengthen the external validity of previous studies in the laboratory.