Selected Working Papers

The Voluntary Production and Use of Management Accounting Information in Private Firms. Call, A., B. Hendricks, E. Labro and A. Sutherland (NEW! first version April 2025)

We survey U.S. private firm CFOs on their management accounting information production and dissemination choices. We document substantial heterogeneity in the production frequency of variance analyses, profitability analyses, sales forecasts, cost allocation reports, and other managerial accounting information practices, as well as in the dissemination of this information to internal and external parties. Suppliers receive this information far less frequently than what the academic literature seems to suggest. Despite private firms not facing internal controls requirements, many see value in establishing control systems and report operational benefits from them. Our cross-sectional analyses reveal several themes. As firms grow and plan an ownership transition, they produce and disseminate more information. Production and dissemination are also greater among firms obtaining GAAP audits and reporting more technology reliance. Banks and Venture Capital/Private Equity owners appear to influence not only financial reporting practices, but management accounting information practices as well. Collectively, our results shed light on the economic tradeoffs behind management accounting information practices in a setting where accounting choices are voluntary.

Internal Forecasts in Multi-Location Firms. Gallo, L, E. Labro and J. Omartian (latest version: April 2025, conditionally accepted at Journal of Accounting Research)

We investigate the dynamics of internal forecasting in multi-location firms and the relations between forecast characteristics and investment. Using US Census microdata on plant-level growth expectations, we find that plants within multi-location firms make forecasts that are both more overly certain and less accurate than those of standalone plants. We provide evidence suggesting that headquarters infers uncertainty from inter-plant forecast disagreement, and that headquarters is able to facilitate the use of relevant information held by one plant but applicable to another. Differences between peer and focal plants’ forecasts predict forecast errors and relate to investment decisions at the focal plant, suggesting that information from multiple sources is integrated into capital allocation decisions. Headquarters’ heavier use of peer plant forecast information when focal plants are more uncertain likely weakens focal plant managers’ incentives to consider extreme scenarios when forecasting.

Tax-Induced Organizational Complexity and Executive Performance Measurement. Gallemore, J., E. Labro and G. Scanlon (latest version: June 2024)

We investigate the relationship between tax-induced organizational complexity (TIOC) and executive performance measurement.  We define TIOC as organizational complexity that would not exist in a world without differing tax policies across jurisdictions. While these structures can reduce tax burdens, firms must design their performance measurement systems to ensure executives effectively manage this complexity. Measuring TIOC using firms’ subsidiaries in tax havens and other low-tax countries, and controlling for non-tax sources of organizational complexity, we find first that TIOC is associated with longer-term performance measurement, consistent with executives needing to manage both the often-immediate tax benefits and often-delayed costs associated with TIOC. Second, TIOC is associated with a higher use of adjusted performance metrics, suggesting firms correct standard metrics for TIOC-induced measurement error and bias. Finally, TIOC is associated with more unique metrics and lower similarity in metrics across the executive team, consistent with effective management of TIOC requiring diverse activities.

Consistency is Key: How Costing Information Consistency Helps Hospitals Manage Costs. Labro, E., G. Scanlon and L. Stice-Lawrence (latest version: March 2025)

Health care costs in the United States make up a larger proportion of gross domestic product than in any other developed country and continue to rise. We examine whether the use of consistent costing information across hospitals (“costing information consistency”, or CIC) provides one avenue to reduce these costs. We empirically measure CIC at the hospital level by identifying how many other hospitals in the hospital group to which the hospital belongs also use the same costing system vendor. Using M&A activity among costing system vendors as an instrument for exogenous changes in hospital CIC, we find that increased cost comparability from CIC leads to economically significant decreases in hospital costs. These cost reductions appear to be achieved without compromising quality of care. We find no significant association between CIC and declines in patient satisfaction, mortality, or readmission rates. Reductions in expenses as the result of CIC are concentrated in non-clinical services such as administration, medical records, and housekeeping.