Abstract
With this Editorial I welcome a new Associate Editor, Peter Liesch (University of Queensland), who has agreed to lead the Strategy and International Business Department. Peter brings a wealth of experience and accomplishment to the journal. He has published in the top journals in management, international business, strategy and marketing providing valuable breadth to a cross-disciplinary journal such as the Australian Journal of Management. His is currently also on the Editorial Boards of the Journal of International Business Studies and the Journal of International Management. The current Associate Editor for this Department, Andrew Griffiths, will continue to serve while the papers under his purview remain in the review process. I am also pleased to welcome Steven Cahan (University of Auckland) to the editorial board. Steven is also widely published, having had articles in The Accounting Review, Contemporary Accounting Research and Accounting Horizons, amongst others. He is currently Editor of Accounting and Finance, so his presence on the editorial board will strengthen the already strong links between these two leading regional journals.
I am very pleased with the content of the current issue. We have very strong articles from the organization behaviour and marketing areas, as well as a number of exciting manuscripts from both finance and accounting. Our efforts to attract some of the leading research on a consistent basis not only from within the region but also internationally do seem to be paying dividends.
The lead article by Ross Donohue examines the phenomenon of career changing. Donohue is interested in the factors associated with career mobility. His starting point is Holland’s 1997 theory concerning the fit between vocational personalities and work environments, and indeed he does find support for that paradigm. However, perhaps more interestingly is that he is not able to establish that that differentiation and consistency moderate the relationship, as predicted by Holland. Differentiation is the extent to which a manager has spikes on measures of personality type, while consistency is the degree of variation between the different items. For organizations interested in reducing staff turnover and identifying executives likely to change careers, this finding helps them avoid chasing criteria that are not related to the phenomena at issue. It could be argued that we spend two little time in management looking at relations that do not exist, always chasing significant results. This article demonstrates the value of a (partially) null finding.
The second article in this issue, by Chen, Su and He, is also related to the study of fit, or congruence. The object of study is the degree to which corporate associations’ influence on consumer response is mediated by the fit between the cause and the organization that is aligning itself with it. Their results are interesting and, to me, not necessarily intuitive. Unsurprisingly, companies strongly associated with corporate social responsibility fare better when the causes that they support are congruent with their commercial activities. However, companies with a strong reputation for superior corporate capabilities may actually be better off by aligning themselves with causes that are incongruent with their product and service mix. While, with the benefit of hindsight, we may speculate as to why this might be the case, it is not a finding that I would have forecast a priori. As an aside, as the editor of a journal that covers all aspects of marketing and other management disciplines, I find it interesting to see the turf war between CSR and account management for the initials CRM (meaning Cause Related Marketing and Customer Relationship Management, respectively).
Also in this issue, we bring you three papers in finance. The first of these three, by Arqawi, Bertin and Prather, seeks to confirm prior evidence, based on US data, that there is a negative relationship between firms’ commitments to service product warranties and their leverage. The replication is undertaken on Australian data, allowing a comparison given the differences between the two countries with respect to their dividend tax systems and the debt market. Arqawi and colleagues document results consistent with those previously documented in the US, suggesting that environmental variations are not sufficient to lead to outcomes in this area. The paper opens the way to further work on the nature of this relationship, and in particular possible endogeneity concerning both the direction of the relationship and whether omitted variables may be driving both factors (using longitudinal data).
The second finance paper, by Koerniadi, Krishnamurti and Tourani-Rad, studies the effects of a set of firm-level corporate governance have an impact on corporate risk taking, in a setting (New Zealand) they claim is characterized by lower managerial risk-taking tendencies. Since risk-taking behaviour at the board level has been shown to be associated with a variety of firm- and market-level characteristics, it is particularly useful to extend research undertaken in a US context to different environments. Indeed the authors do discover a number of differences in factors associated with risk-taking behaviours. For example, they do not find compensation structure is a significant predictor of risk proclivity. They do identify a number of other factors as important in both risk proneness (e.g., multiple institutional shareholders) and risk aversion (e.g., multiple insider shareholding and board size). One of the attractive features of this manuscript is the effort to which the authors have gone to identify and then test for different sources of heterogeneity. The research naturally lends itself to a more extensive cross-national comparison of these factors and I would love to see such an article, well executed, in the journal.
The third finance paper in the issue, by Rosov and Foster, examines the possibility of information about future currency exchange rates being contained in customer orders. The Holy Grail in finance is the search for leading indicators of future market movements and, so, this is a worthy cause. The fact that the authors do not find such a relationship is of itself interesting. Many of the management sciences, including finance, have a bias towards publishing positive findings. That means that our understanding of the nature of relationships is most often sampled from the right-hand tail in terms of strength of relationships. In my view, as researchers we should be interested in which is not, as well as what is. I therefore consider Rosov and Foster’s paper to be a useful addition to the literature, with the dynamic analysis carefully and well executed.
The issue closes with two accounting articles. The first of these, by Wee, Tarca and Chang, looks at the factors associated with narrative disclosure in company statutory financial statements and stock exchange announcements, both in relation to economic and accounting changes. They find that firms feel a stronger need to make such statements when their performance is negative, rather than positive, and that such statements are value relevant in terms of helping financial stakeholders understand the firm’s performance. In a time when accounting changes are particularly prevalent due to changes in the macro-economic environment (such as the rise of the importance of intangibles and increasing globalization with its associated pressure for standardization of treatment of accounting issues), it is useful and re-assuring to know that narrative support to numerical changes in treatment plays a useful role in creating a more informed market.
The final paper in the issue is by Artiach and Clarkson. It addresses the topic of conservatism, central to the historic development of accounting standards, but coming under increasing pressure as regulators take an expected value approach to calibrating the firm’s past performance and future earnings prospects. Artiach and Clarkson show that increased levels of conservatism are associated with lower costs of equity capital. While, as might be expected, this relation is weaker when information asymmetry is lower, the authors take this to be a sign that conservatism plays a useful function, at least for one major group of stakeholders: the proprietors of the firm. This is valuable research in that it cuts to the core of the philosophical underpinnings of accounting, which in turn fundamentally affect the standards that we adopt. While there are many factors influencing both the degree of conservatism and the cost of equity and unteasing the inter-relations between them is extraordinarily complex, it is a very useful exercise to undertake. This is indeed a rich area for future research and one central to the practice of accounting in the future.
I hope that you enjoy the articles in this issue. As always, I very much welcome your feedback on the journal and its contents.