Money, finances and credit

Accounting decisions from the perspective of profitability

Economic Annals-XXI

Economic Annals-ХХI: Volume 166, Issue 7-8, Pages: 72-75

Citation information:
Necula, S.-C. (2017). Accounting decisions from the perspective of profitability. Economic Annals-XXI, 166(7-8), 72-75. doi: https://doi.org/10.21003/ea.V166-14

View Full-TextDownload PDF

Sabina-Cristiana Necula
PhD (Economics),
Scientific Researcher,
Department of Research,
Faculty of Economics and Business Administration,
Alexandru Ioan Cuza University of Iasi
11 Carol I Blvd., Iasi, 700506, Romania
sabina.mihalache@gmail.com
ORCID ID: https://orcid.org/0000-0001-6912-2450

Accounting decisions from the perspective of profitability

Abstract. This paper presents accounting decisions in terms of recognition, classification and evaluation. The relevance of the study is determined by the objective of a fair value measurement under the conditions of economic and financial profitability. The author of the article explores the issues relating to the research by considering the Romanian bank sector and using data from 2011 to 2016. The article distinguishes accounting decisions from managerial decisions and reflects the relevant effects on management information system.

The hypothesis identifies the current income-reducing accounting choice and the «net profit» independent variable. In order to test it, it is essential to identify empirically observable data that can be a proxy for such variables. The study considered «provisions for non-performing loans» as the dependent variable. The commonly identified economic factors that might influence a firm’s choice of accounting methods are management bonus schemes and leverage. The hypothesis was thus tested by using total bank profits as independent variables.

Keywords: Accounting Decisions; Fair Value; Economic Profitability; Financial Profitability; Managerial Decisions; Raiffeisen Bank; Comercial Bank of Romania

JEL Classification: M10; M40; M41; M49

DOI: https://doi.org/10.21003/ea.V166-14

Reference

  1. Augier, M., March, J., & Sullivan, B. (2005). Notes on the Evolution of a Research Community: Organization Studies in Anglophone North America 1945-2000, Organization Science, 16(1), 85-95.
    doi: https://doi.org/10.1287/orsc.1040.0108
  2. Bowen, R., DuCharme, L., & Shores, D. (1995). Stakeholders’ Implicit Claims and Accounting Method Choice, Journal of Accounting and Economics, 20(3), 255-295.
    doi: https://doi.org/10.1016/0165-4101(95)00404-1
  3. Bowen, R., DuCharme, L., & Shores, D. (1999). Economic and Industries Determinants of Accounting Method Choice. Seattle: University of Washington Business School.
    doi: https://doi.org/10.2139/ssrn.182888
  4. Buchanan, L. O’., & Connell, A. (2006). A Brief History of Decision Making, Harvard Business Review, 84(1), 32-41.
    Retrieved from https://hbr.org/2006/01/a-brief-history-of-decision-making
  5. Chenhall, R. H. (2003). Management control systems design within its organizational context: findings from contingency-based research and directions for the future. Accounting Organizations and Society, 28(2-3), 127-168.
    doi: https://doi.org/10.1016/S0361-3682(01)00027-7
  6. Choo, C. W. (2000). Closing the Cognitive Gaps: How People Process Information, In Marchand, D., & Davenport, Th. (Eds.), Mastering Information Management (1st ed.). Financial Times Prentice Hall.
    Retrieved from http://choo.fis.utoronto.ca/fis/respub/FThis/default.html
  7. Collier, P. M. (2015). Accounting for Managers. Interpreting Accounting Information for Decision-Making (5th ed.). John Wiley & Sons
  8. Comyns, B., Figge, F., Hahn, T., & Barkemeyer, R. (2013). Sustainability reporting: the role of «Search», «Experience» and «Credence» information. Accounting Forum, 37(3), 231-243.
    doi: https://doi.org/10.1016/j.accfor.2013.04.006
  9. Datar, S., Kulp, S. C., & Lambert, R. A. (2001). Balancing performance measures, Journal of Accounting Research, 39(1), 75-92.
    doi: https://doi.org/10.1111/1475-679X.00004
  10. Emblemsvåg, J. (2003). Life-Cycle Costing. Using Activity Based Costing and Monte Carlo Methods to Manage Future Costs and Risk (1st ed.). New York: John Wiley & Sons.
  11. Georgescu, F. (2017). The bank capital in Romania. The Banker Journal, March 2017.
    Retrieved from http://www.bancherul.ro/files/1704192339_Florin-Georgescu-capitalul-bancar-2017.03.30_INCE3.pdf (in Romanian)
  12. Klein, D. (2015). Ethics in Accounting: A Decision-Making Approach. John Wiley & Sons.
  13. Luft, J., Shields, M. D., & Thomas, T. F. (2016). Additional Information in Accounting Reports: Effects on Management Decisions and Subjective Performance Evaluations Under Causal Ambiguity. Contemporary Accounting Research, 33(2), 526-550.
    doi: https://doi.org/10.1111/1911-3846.12156
  14. Moers, F. (2005). Discretion and bias in performance evaluation: the impact of diversity and subjectivity. Accounting Organizations and Society, 30(1), 67-80.
    doi: https://doi.org/10.1016/j.aos.2003.11.001
  15. Simon, H. (1978, December 8). Rational Decision-Making in Business Organizations, Nobel Memorial Lecture.
    Retrieved from https://ideas.repec.org/p/ris/nobelp/1978_001.html
  16. Solomon, I., & Shields, M. D. (1995). Judgment and Decision Making Research in Auditing, In R. H. Ashton, & A. H. Ashton (Eds.), Judgment and Decision Making Research in Accounting and Auditing (Chapter 6). New York: Cambridge University Press.
  17. Watts, R. L., & Zimmerman, J. L. (1978). Towards Positive Theory of the Determination of Accounting Standards. Accounting Review, 53, 112-134.
    Retrieved from https://ru.scribd.com/document/261377600/Watts-Zimmerman-1978-Towards-a-Positive-Accounting-Theory-for-the-Determination-of-Accounting
  18. Watts, R. L., & Zimmerman, J. L. (1986). Positive Accounting Theory. Englewood Cliffs, New Jersey: Prentice-Hall.

Received: 26.05.2017

View Full-TextDownload PDF
In, , , , , , ,

More Papers