Robert M. Brown

An Empirical Investigation of the Relationship Between Change in Corporate Social Performance and Financial Performance: A Stakeholder Theory Perspective

Stakeholder theory provides a framework for investigating the relationship between corporate social performance (CSP) and corporate financial performance. This relationship is investigated by examining how change in CSP is related to change in financial accounting measures. The findings provide some support for a tenet in stakeholder theory which asserts that the dominant stakeholder group, shareholders, financially benefit when management meets the demands of multiple stakeholders. Specifically, change in CSP was positively associated with growth in sales for the current and subsequent year. This indicates that there are short-term benefits from improving CSP. Return on sales was significantly positively related to change in CSP for the third financial period, indicating that long-term financial benefits may exist when CSP is improved.

Strategic information systems and financial performance

Investment in strategic information systems (SIS) is advocated by numerous authors as an important way for firms to seek competitive advantage. Yet there is still little empirical evidence that implementation of SIS results in long-term competitive advantages. This is primarily due to the difficulty of isolating economic benefits attributable to SIS implementation. In this research, thirty-five sample firms identified in the media for successful employment of SIS are analyzed for evidence of long-term financial success. This analysis is conducted over a thirteen-year period, centered around the year in which firms were identified for employment of SIS to either support growth, control costs, form alliances, differentiate products, or provide innovation of products/processes. Results show that the stock market reacted favorably to announcements that firms were using SIS, and in subsequent years those firms tended to be more productive and more profitable than their industries and than firms in their respective industries. The greatest profitability differences occurred in the years after SIS firms were initially recognized as successfully employing SIS or investing in SIS. Further, a subsample analysis revealed that the positive results were primarily driven by those firms employing SIS to support growth.

Components and relative weights in utilization of dashboard measurement systems like the Balanced Scorecard

Abstract This study provides empirical evidence on how dashboard measures are utilized in the evaluation of organizational performance. A hypothetical case, complete with dashboard measures, was presented to MBA students and graduate accounting students. Participants were asked to identify the importance of various measures and evaluate the organizations performance. Evidence gathered through the use of principal components analysis provided insight into the number of perspectives or components utilized in evaluating an organizations performance and the relative weight placed on each of those components by users of dashboard measurement systems. The evidence suggests that the number of performance measurement components and their relative composition is situational. They depend heavily on strategies of the organization. Bottom-line financial measures like return on invested capital and net profit, while perceived as more important than their nonfinancial counterparts, were not part of the extracted components suggesting that they were viewed as outcomes to be achieved by controlling more significant nonfinancial measures.

An Experiment Testing the Determinants of Non-Compliance with Insider Trading Laws

Recent stories of corporate insiders avoiding losses and, in some cases, generating enormous personal profits as their companies crumbled have led investors to question the integrity of American business and the fairness of the United States stock markets. The SEC tries to ensure the fairness of the stock markets by making and enforcing laws against unfair practices such as insider trading. In the United States, when insiders trade stock based on non-public information, they have broken the law and betrayed the trust that has been placed in them.This study used student subjects to test the relationship between the likelihood of trading based on insider information and subjective probabilities of deterrents and motivations for insider trading. Expected gain, guilt, cynicism, and fairness of laws were the determinants that had a significant relationship with the intent to trade based on insider information. This study also found support for prospect theory with regard to insider trading. The results indicate that subjects are more likely to trade based on insider information to avoid a loss than to achieve an abnormal gain. The study also finds evidence of social desirability response bias.Additional findings of the study were that subjects did not view the determinants for themselves in a manner consistent with how they viewed those same deterrents and motivations for other people. Also, a test of the effects of gender found that certainty and social stigma were significantly higher for female respondents than for male respondents.

Organizational innovativeness, competitive strategy and investment success

Abstract Case studies in the information systems literature provide evidence that strategic information systems (SIS) have been used to gain a competitive advantage. In the organizational behaviour and strategic management literature, links have been shown to exist between environmental factors, organizational variables, strategic choice, and firm innovation. This study combines and extends these areas of research by examining relations among the innovative climate of organizations and the SIS strategies implemented, the perceived success of investments made in SIS, and general end-user involvement. The analysis reveals that the innovative thrust of an organization significantly affects the aggressiveness of the firms strategy for investment in information technology, the perceived success of investments in SIS, and the involvement of end-users in application development. Additionally, there are significant relations between investment strategies selected and perceived success.

Financial Measures Bias in the Use of Performance Measurement Systems

This paper examines potential cognitive difficulties inherent in the use of performance measurement systems. We examine the potential for emphasizing financial measures as compared to nonfinancial measures in the evaluation of an organizations overall performance. The results suggest that users of performance measurement data will emphasize historical financial measures. Two separate experiments provide additional evidence that users of performance measurement data suffer a halo bias, in that an organizations performance on financial measures appears to influence their perception of the organizations performance on nonfinancial measures.

Antitakover Devices and Management Efficiency: An Empirical Study Using Accounting Measures

Separation of corporate ownership and control creates an environment whereby the agent (management) may pursue self-interests at the expense of the principal (stockholders). One mechanism protecting stockholders from self-interested management is the market for corporate control, or the takeover market. Antitakeover devices impede the operations of this market. This paper reports on the study of one type of antitakeover device, the supermajority nonfair price amendment. This device is particularly onerous, and if antitakeover devices do protect inefficient management as has been alluded to in the literature, then evidence of inefficiency should be observable for companies adopting supermajority nonfair price amendments.To test the above proposition, we examine the difference in performance over a seven-year period (1) Between firms having supermajority nonfair price amendments and a set of matched firms that do not have these devices, and (2) between firms with these amendments and their respective industries. In both tests, performance was lower for the firms adopting these amendments, which suggests that these devices are used to protect inefficient management. Further, the argument that managers of firms which adopt antitakeover devices so that they can take a long-term outlook at the expense of short-term profitability was not supported by the data.