Financial Accounting Regulation: A Double-Edged Sword for Management Accounting? Labro, E. and J. Pierk (latest version: January 2026) Invited for write-up in Accounting and Business Research.
Financial and management accounting serve distinct purposes: external reporting versus internal decision-support and performance evaluation. We discuss how changes in financial accounting regulation can create significant spillover effects on managerial accounting information and the decisions and performance evaluations it supports. We identify five mechanisms through which these spillovers may arise: (1) mandatory external disclosure of previously internal information, (2) generation and disclosure of new information, (3) measurement standardization, (4) shifts in the objectives of financial reporting (e.g., toward value relevance or toward principles-based accounting), and (5) changes in the frequency of external reporting. Most empirical studies capture indirect effects on decision outcomes (e.g., investment efficiency) and agency conflicts, and we call for more research on the direct changes in management accounting practices. While prior literature emphasized detrimental spillovers, the evidence was largely anecdotal, and recent large-scale studies mostly document beneficial effects. We call for further scholarly investigation and identify opportunities to explore heterogeneity in these effects, to apply mixed methods, and to examine emerging regulatory domains such as Corporate Social Responsibility (CSR) and Environmental, Social and Governance (ESG) reporting. For regulators, our findings underscore that financial reporting mandates may unintentionally reshape firms’ internal information environments and managerial decisions.
The Voluntary Production and Dissemination of Management Accounting Information: Evidence from U.S. Private Firms. Call, A., B. Hendricks, E. Labro and A. Sutherland (latest version: January 2026)
We survey and interview U.S. private firm CFOs on their management accounting information practices (MAIPs). We document substantial heterogeneity in the production frequency of budgets, variance analyses, profitability analyses, sales forecasts, cost allocation reports, and capital budgets as well as in the dissemination of this information to internal and external parties. While middle managers commonly access internal reports, rank-and-file employees and suppliers receive them far less frequently than what prior work suggests. Despite not having to comply with Sarbanes-Oxley, many firms regularly evaluate internal control effectiveness and indicate their controls improve operational efficiency. Banks and venture capital/private equity owners appear to influence not only financial reporting, but also MAIPs. Collectively, our results shed light on the voluntary production and dissemination of management accounting information in a setting largely unaffected by financial reporting mandate spillovers.
Tax-Motivated Organizational Complexity and Executive Performance Measurement. Gallemore, J., E. Labro and G. Scanlon (latest version: October 2025)
We investigate how tax-motivated organizational complexity (TMOC)—the intentional design or structuring of firms’ organizational architecture specifically aimed at facilitating tax planning and minimizing tax obligations—affects executive performance measurement. While these structures can reduce tax burdens, firms must ensure their performance measurement systems encourage executives to effectively manage this complexity. Measuring TMOC using firms’ subsidiaries in tax havens and low-tax countries, we find TMOC is associated with longer-term performance measurement, consistent with executives needing to manage the often-delayed costs associated with TMOC. Additionally, TMOC leads to greater use of adjusted performance metrics, suggesting firms correct standard metrics for TMOC-related measurement error and bias. TMOC is also associated with more unique metrics and lower metric similarity across the executive team, reflecting diverse management activities required. Finally, TMOC is associated with greater future SG&A expenses, but this effect is mitigated when executives focus on managing TMOC-induced costs through performance measurement.
Consistency is Key: How Costing Information Consistency Helps Hospitals Manage Costs. Labro, E., G. Scanlon and L. Stice-Lawrence (latest version: May 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.
