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This second installment in a series of columns on accounting research summarizes results from the field of management and cost accounting. The 2006 through June 2007 issues of five top-tier journals in management and cost accounting research were examined. Those publications included, alphabetically, Accounting, Organizations and Society; The Accounting Review; Contemporary Accounting, Research; the Journal of Accounting Research; and Management Science.
These summaries explain the implications of a wide range of research and give CPAs the opportunity to apply the results in day-to-day activities. Readers interested in more detail should review the full text of each article to explore the hypothesis, research process, statistical analysis, supporting theories and conclusions.
ATTRACTING FOREIGN INVESTORS
Data show the voluntary adoption of International Accounting Standards (IAS) works as a magnet for foreign capital. Authors Vicentiu M. Covrig, Mark L. Defond and Mingyi Hung analyzed companies that voluntarily used IAS as opposed to their own country's accounting standards. Their study calculated the percent age of foreign mutual fund ownership in these companies as compared to those that had not adopted IAS. Companies using IAS had predictably larger investments by foreign mutual funds. The attraction appeared greatest given two circumstances: companies located in countries that typically had poor or vague reporting standards and mutual fund investors with specific geographical regions as their investment objective.
The research, published in the March 2007 issue of the Journal of Accounting Research, is titled "Home Bias, Foreign Mutual Fund Holdings, and the Voluntary Adoption of International Accounting Standards." According to the authors, capital allocation efficiency is improved through adopting IAS.
CELEBRITY EFFECT ON STOCK PRICES
A study published in the Journal of Accounting Research suggests that investors overreact to high levels of coverage of earnings forecast revisions by celebrity media. The article by Sarah E. Bonnet, Artur Hugon and Beverly R. Walther examined the amount of media coverage given to earnings forecast revisions and its effect on investors ("Investor Reaction to Celebrity Analysts: The Case of Earnings Forecast Revisions," June 2007).
The authors predicted that well-publicized stock analysts, due to their celebrity (success, reputation and recognition) would …