The effects of judgmental biases on managerial accounting techniques

Subject Areas : Management Accounting

فریدون  رهنمای رودپشتی ¹ (ندارد)
هاشم  نیکومرام ² (ندارد)
آرزو  جلیلی ³ (ندارد)

Received: 2012-07-15 Accepted : 2012-09-24 Published : 2013-06-10

Keywords: Managerial Accounting Techniqu, over confidence, optimism, Hindsight, Representativeness,

Abstract :

The main objective of this article is to investigate the effects and consequences ofbehavioral biases – at the judgmental level – on managerial accounting techniques. Inthis respect, the individual judgmental biases – including: Over Confidence, Optimism,Hindsight, and Representativeness biases, - are treated as independent variables, whilethe managerial accounting techniques functions– including: Budgeting and Forecasting,Evaluating the undesirable consequences of the risk, Performance Evaluation, TakingRisky Options, Ranking and Weighting the potentiality of the risk in different ventures,and feedback assessment of the risk potentiality, - are considered as dependentvariables.The Structural Equation Modeling Technique, with Maximum Accuracy (ML) hasbeen utilized for hypothesis test. The following results are the overall findings:1) The results showed that, there is an opposite relationship between OverConfidence and Optimism biases, on one hand, and managerial accountingtechniques on the other hand;2) A meaningful straight linkage between Hindsight bias and managerialaccounting techniques was observed;3) No potential relationship between Representativeness bias and the dependentvariable could be found;

References:

1) شباهنگ، رضا ، ( 1378 )، حسابداری مدیریت،
چاپ ششم، انتشارات سازمان حسابرسی
2) رهنمای رودپشتی، فریدون ، ( 1387 )، مبانی
حسابداری مدیریت : رویکرد و دیدگاه نوین ،
تاثیر سوگیری های قضاوتی بر کارکرد تکنیک های حسابداری مدیریت
مجله حسابداری مدیریت / شماره شانزدهم 89
چاپ اول، انشارات آزاد اسلامی واحد علوم
تحقیقات.
3) رهنمای رودپشتی، فریدون، ( 1390 )، حسابداری
مدیریت رفتاری(رویکرد نوآوری، ارزش آفرینی
و کاربردی)، چاپ اول، انتشارات دانشگاه آزاد
اسلامی.
4) Adam, Tim, and Chitru Fernando, Evgenia
Golubeva, 2010, Managerial Biases and
Argyris, C. (1952). The impact of budgets
on people. New York: Controllership
Foundation.
5) Argyris, C. (1953). Human problems with
budgets. Harvard Business Review, 31, 97–
110.
6) Banker, R. D., H. Chang, and M. J. Pizzini,
2004, The balanced scorecard: judgmental
effects of performance measures linked to
strategy, The Accounting Review 79, 1–23.
7) Ben-David, Itzhak, John R. Graham, and
Campbell R. Harvey, 2007, Managerial
Overconfidence and Corporate Policies,
Working Paper.
8) Billett, Matthew T., and Yiming Qian,
2008, Are Overconfident CEOs Born or
Made? Evidence of Self-Attribution Bias
from Frequent Acquirers, Management
Science 54, 1037-1051
9) Birnberg, J.(2011). A proposal framework
for behavioral accounting research.
Behavioral research in accounting. Vol23.
No.1. pp 1-43. 10) Birnberg, J., Luft, J. and Shields, M.(2007).
Handbook of Management Accounting
Research. Elsevier Ltd.
11) Farall, P.,(2003), "Investors are their own
worst Enemy. Nobel Laureat Says
Optimism Sabotages performance", CBS
marketwatch.com
12) Fischoff,B.,2005, Hindsight/foresight: The
effect of outcome knowledge on judgment
under uncertainty, journal of experimental
psychology: human perception and
performance 1, no.3:288-99
13) Gonzalez, R., H. Langholtz, and B.
Sopchak (2002), ‘Minimizing cost in
resource-allocation decisions’.
Organizational Behavior and
HumanDecision Processes 89(2), 1032–
1057.
14) Heaton, J.B., 2002, Managerial Optimism
and Corporate Finance, Financial
Management,Summer, 33-45.
15) Kachelmeier, S. J., B. E. Reichert, and M.
G. Williamson (2008),‘Measuring and
motivating quantity, creativity, or both’.
Journal ofAccounting Research 46(2), 341–
373.
16) Kahneman,D and Reipe,M,( 1998),
"Aspects of investor psychology", journal
of portfolio management, 52-64
17) Krishnan, R., J. Luft, and M. Shields
(2005), ‘Effects of accounting method
choices on subjective performance-measure
weighting: Experimental evidence on
precision and error covariance’. The
Accounting Review 80(4), 1163–1192.
18) Libby,T., S.E. Salterio, andA.Webb,
2004,The balanced scorecard: the effects of
assurance and process accountability
onmanagerial judgment,
TheAccountingReview 79, 1075–1094
19) Lipe, marlys Gascho, Salterio, steven E.
(July 2000) “The Balanced scorecard:
Judgment Effects of common and Unique
performance Measures ” “Vol 75. No. 3.
20) Malmendier, Ulrike, Geoffrey Tate, and
Jon Yan, 2010, Managerial Beliefs and
Corporate Financial Policies, Working
Paper.
21) Pompian, M, Longo, J., 2004, A new
paradigm for practical application of
behavioral finance: creating programs
based on personality type and gender to
produce better investment outcomes,
Journal of wealth management.
22) Posner,R., 1998, Rational choice,
behavioral economics, and the law,
Stanford law review 50:1551-75
23) Sawers, K. (2005), ‘Evidence of choice
avoidance in capital-investment
judgements’. Contemporary Accounting
Research 22(4), 1063–1092.
24) Trotman, K, Tan, H, Ang, N. (2011), Fiftyyear
overview of judgment and decisionmaking
research in accounting, Accounting
& Finance51, 278-360.
25) Wong-On-Wing, B., L. Guo, W. Li, and D.
Yang, 2007, Reducing conflict in balanced
scorecard evaluations, Accounting,
Organizations and Society 32, 363–377