Roger J. Willett

University of Tasmania · Tasmanian School of Business & Economics

This paper investigates the impact of activism on a large, powerful corporation in Tasmania. Gunns Ltd was a large woodchip processor in Tasmania that fought a long-running battle with environmental activists regarding Gunns’ logging and processing activities. The study focuses on events in 2004-2005, when Gunns applied to build a pulp mill in rura...

This paper examines the explanatory power of earnings in equity valuation and value relevance of earnings through a combination of cross-section and time series regression analysis. Cross-section models are based up all US firms with a 31 December year-end in the Compustat files between 1963 and 2009. Time series models are based on a sample of 30...

This paper examines the value relevance of regulatory bank capital components. Using quarterly U.S. bank data from 2001 to 2015, we empirically examine the value relevance of the following capital components: i) Tier 1 capital, ii) regulatory adjustments, and iii) Tier 2 capital. Our research design relies on multiplicative regression models that m...

Regression analysis of accounting costs on physical activity levels for a number of vessels is used to estimate optimum cost and capability of fleet schedules. Quarterly accounting and activity data is used, the regression analysis showing the existence of lags of 3 to 9 months between the occurrence of an engineering activity and the recording of...

This study compares the market–book relation of Australian and US firms using firm-level dynamic analysis of using annual data for a long-run period in error correction modelling. This paper contributes to a recent call for alternative ways of estimating Ohlson-type linear valuation models (Ohlson and Kim, 2015). Log transformations of the data are...

Empirical evidence, mostly cross-sectional, is provided in this paper supporting the theory that the market accounting-relation is best understood as a multiplicative relation, when the modeled variables are positive. The theory is shown to work well with large sets of cross section and pooled data as well as in time series analysis with more limit...

This study examines the implied underlying relation between market and accounting values in a long-run time-series approach based on error correction principles. Recent studies have suggested problems with the current approaches to linear valuation modelling (Ohlson and Kim, 2015). The results this study show that firm market values show slight mea...

Exponential growth of market value, book value, and earnings is a basic characteristic of many firms. We propose a simple theory linking market value to a multiplicative relation of accounting variables and a lognormal error term, when model variables exhibit this characteristic. Implications for the interpretation of estimated coefficients in comm...

Purpose – The purpose of this paper is to draw together available data as a means of comparing the state of corporate governance in five countries; Kuwait, Bahrain, the United Arab Emirates, Qatar and Oman. This comparison provides a basis for analyzing the efficacy of corporate governance and government regulation in the region. Design/methodolog...

We explain and demonstrate a disciplined and systematic approach to repeatable modelling using forecast criteria, in addition to the usual statistical estimation criteria, to identify value relevance in regressions of the market‐accounting relation. The method was used in Cooke et al. (2009). It is illustrated here in the case of a single firm over...

Earnings quality, conservative accounting and earnings management, are interpreted in a variety of ways in theory and empirical research in the accounting literature. Little attention is paid, in defining these concepts, to the accounting measurement procedures that generate accounting numbers or to how they reflect the underlying economic fundamen...

Regression analysis of accounting costs on physical activity levels for a number of vessels is used to estimate optimum cost and capability of fleet schedules. Quarterly accounting and activity data is used, the regression analysis showing the existence of lags of 3–9 months between the occurrence of an engineering activity and the recording of the...

In this paper firm parameter heterogeneity in cross section regression analysis in capital market research (CMR) is investigated. Using panel data for 30 large US firms over the period 1955 to 2004, a well-specified common form of dynamic model for each firm is identified. Average parameter estimates from these models are compared to average parame...

The validity of ordinary least squares (OLS) estimates of relationships between accounting numbers and market value made in capital market research (CMR) using linear, additive models is questioned. Multiplicative models are argued to be more consistent with underlying economic theory for long-lived firms. Annual cross-section and firm-specific dyn...

We discuss some perceived shortcomings of management accounting in the light of the financial crisis of 2008. We describe current trends in management accounting thinking and Japanese perspectives on the discipline. Our main focus is on the lack of reliable measurement of financial risk and its consequences. The importance of collaborative multi-di...

Earnings quality is nearly always examined in a political context in the accounting literature, focusing on the motivations of managers to deceive the users of financial statements. The literature pays little or no attention to the accounting measurement procedures that generate accounting numbers and their impact on the accuracy with which earning...

Definitions of asset management tend to be broad in scope, covering a wide variety of areas including general management, operations and production arenas and, financial and human capital aspects. While the broader conceptualisation allows a multifaceted investigation of physical assets, the arenas constitute a multiplicity of spheres of activity....

This paper describes a case study illustration of a technique that can be used to optimize capital expenditure budget decisions for engineering assets under multivariate objectives and uncertain costs. We define measures of capability increase relative to mission types and measures for risk, return and pseudo-correlation on potential maintenance up...

In this paper, Statistical Activity Cost Analysis (SACA) is used to identify the interaction of mutually dependent physical and financial aspects of a fixed asset-like system configuration. The novelty of the approach is, having established a rational description of the uncertainty inherent in both domains, the analysis of their interaction. Little...

Definitions, Concepts and Scope of Engineering Asset Management, the first volume in this new review series, seeks to minimise ambiguities in the subject matter. The ongoing effort to develop guidelines is shaping the future towards the creation of a body of knowledge for the management of engineered physical assets. Increasingly, industry practiti...

The aim of this paper is to support an improved understanding of the long-run relationship between market and accounting values in capital market research (CMR) by using firm-level dynamic modelling techniques or long-lived firms. The market and accounting values of thirty selected individual firms listed on the Australian stock exchange (ASX) duri...

Market and accounting data for five Japanese conglomerates, Toyota, Fuji, Sony, Itochu and Sumitomo, are analysed over the period 1950 to 2004. Annual market value is regressed on three accounting and six macroeconomic variables, using a general-to-specific approach to construct simple error correction models for each of the five firms. The results...

Basic annual cross sections of market on accounting values are estimated in levels and returns using a 30 US firm by 50 year panel of data. Log transformations of the levels data are shown to produce an improved statistical specification. Deflated returns models are shown to suffer from other problems of inference. The nature of the implicit assump...

In this paper, Statistical Activity Cost Analysis (SACA) is used to identify the interaction of mutually dependent physical and financial aspects of a fixed asset-like system configuration. The novelty of the approach is, having established a rational description of the uncertainty inherent in both domains, the analysis of their interaction. Little...

A case study of the implementation of the balanced scorecard in a large local government authority is reported. Based on interview data, the factors that were perceived by senior managers to be important to the success or failure of the implementation are analysed. It is determined that scorecard measures were not effectively cascaded down to lower...

Average parameter estimates from dynamic models for 30 large US firms over the period 1955-2004 are compared to the average parameter estimates from 50 annual cross sections. Results from this sample show statistically well specified models are multiplicative in form, not additive. Dynamic characteristics of model variables complicate interpretatio...

In this paper, experimental, computer simulation methods are used to demonstrate how a depreciation-type adjustment influences the distributional form of accounting earnings. The results confirm conjectures that earnings distributions generally, with or without depreciation adjustments, tend towards a normal form as a function of increasing ‘activi...

Purpose The purpose of this paper is to show how dynamic regression models based on equilibrium correction principles can be used to form auditor expectations of account balances as part of the analytic review. Design/methodology/approach The design and method are empirical, using the automated econometric software of PcGets and annual data of the...

Market and accounting data for Abbott Laboratories Inc over the period 1955 - 2003 are modelled using an error correction approach. The strongest cointegrating accounting variable with market value is earnings. Logs of all variables have to be taken to achieve correct statistical specification, implying a simple multiplicative relationship in the r...

It has been suggested recently that the accounting systems used in developing countries may be irrelevant to their needs because they originate in Western countries with different cultural values. The accounting literature on this point, however, is vague in its assessment of exactly what aspects of Western accounting systems fail to meet the test...

The purpose of this paper is to demonstrate how the axiomatic theory of transaction cost measurement described in Willett (1987, 1988) can be used to determine precisely what accounting numbers represent. By a method of analysis supplemented with simulation experiments, transactions theory is shown to have a unifying character bringing together asp...

This paper uses computer experiments to examine the effect of different overhead cost allocation methods (machine hours, labour hours, material costs, labour costs, equal apportionment, physical quantity, selling price method and activity based costing) on the volatility of earnings over time. Eight different purchasing strategies are considered, b...

To provide further evidence on the effectiveness of analytical procedures (APs) used in auditing. Computer simulation experiments are used to examine the error detection ability of a set of APs. Two different types of errors are examined and compared on the basis of the Type I and Type II errors they produce. The results of the experiments support...

Gray [Abacus (1988) 1] proposed a framework for a theory of cultural relevance in accounting. This renewed an interest in culture-related studies in international accounting. To date, much of this literature has been theoretical or subjectively descriptive because the elements constituting Gray's framework lack an operational foundation. This paper...

This paper uses single equation equilibrium correction modelling (ECM) of the time series relationship between annual market and book values in a single company over the 48 years from 1955 and 2002. It adopts a general-to-specific reduction strategy to construct a statistically congruent, parsimonious time series model exhibiting parameter constanc...

This article develops a theory about the form and the content of the financial information that should be contained in Islamic financial statements. The theory suggests that the presence of the Islamic religion as a cultural variable affects the way certain accounting measures are interpreted and the manner in which accounting information should be...

Studies of factors affecting the earnings response coefficient (ERC) have long been a theme in capital market research. One lesser researched factor suggested in a series of paper by Dhaliwal, Lee and Fargher (1991) as possibly affecting the ERC is the variable of default risk. In particular, based upon an option theory of risky debt, they predicte...

This is a case study of Taylor’s Business School, Taylor’s College in Kuala Lumpur, Malaysia, which is a pioneer in developing a business school as a knowledge organisation following the principles of knowledge management in the context of a developing knowledge economy. Describes the management structure and processes adopted by the college to del...

This paper investigates the perceptions of senior auditors in large firms in Australia, Malaysia and New Zealand concerning sources of auditor legal liability, what should constitute auditors’ duties and what may be done to reduce litigation exposure. Results are consistent with our conjecture that professional and organisational culture dominates...

Practitioners and academics often use book values instead of market values when market data is not available. This is appropriate only if market values and book values are related. In this paper a theoretical model of the relationship between market values and book values is developed and this model is tested directly using time-series analysis. Th...

This paper examines the perceptions of senior auditors in large firms in Sydney, Kuala Lumpur and Auckland concerning the nature and assessment of the inherent risk in risk based auditing. The geographic dispersion of participants from internationally linked firms does not appear to result in any cultural and geographic effects. Assessment of inher...

This paper explores the suggestion that users of financial statements seek a ‘normalized’ version of earnings from which to estimate equity value. We argue that this leads to a theory of earnings to price ratios which is rooted in thecertainty-based ‘economic income’ models of Hicks. Methods laid down in previous research are then used in conjuncti...

This paper describes in outline the basis of a statistical theory of accounting measurement called 'Statistical Activity Cost Theory'. Some applications are explained through the use of computer simulation. The areas of application are: the statistical properties of the depreciation adjustment; a statistical interpretation of standard costing varia...

The general nature of basic accounting measurement procedures is analysed from the perspective of their representational faithfulness rather than, as is normally nowadays done, from the perspective of relevance to user decision models. The character of accounting numbers is examined using an axiomatic framework based in statistical theory to demons...

Following Thomas (1969, 1974) the depreciation adjustment charged against accounting earnings is nowadays commonly presumed to be entirely arbitrary when it is viewed from a measurement perspective. This paper develops a statistical interpretation of accounting measurement to show that the depreciation calculation need not necessarily be viewed as...

Following Thomas (1969, 1974) the depreciation adjustment charged against accounting earnings is nowadays commonly presumed to be entirely arbitrary when it is viewed from a measurement perspective. This paper develops a statistical interpretation of accounting measurement to show that the depreciation calculation need not necessarily be viewed as...

Very little is known about the theoretical statistical properties of accounting numbers. In this papera probability modelling technique is used to analyse the volume, efficiency, and price deviation—more usually known in the accounting literature as ‘variances’—of standard costing. Standard-cost deviations are defined asdifferences between certain...

This paper describes in outline the basis of a statistical theory of accounting measurement called 'Statistical Activity Cost Theory'. Some applications are explained through the use of computer simulation. The areas of application are: the statistical properties of the depreciation adjustment; a statistical interpretation of standard costing varia...

This paper uses a transactions theory approach to analyse some of the measurement and disclosure issues involved in accounting for goodwill and other intangibles. The recent professional and academic literature is reviewed and the traditional economic theory approach to interpreting accounting issues in these areas is criticised. A form of transact...

This paper distinguishes certain well-known accounting systems on the basis of five axioms characterizing their concept of capital maintenance. The structure of these ‘financially coherent accounting systems’ is reduced to a description in terms of simple diagrams called ‘double-edged chain graphs’. The resulting classification singles out essentia...

This paper presents an axiomatic theory of accounting practice which describes accounting concepts in terms of sets. The theory provides a framework within which to understand the significance of accounting measurements for the probabilistic analysis of economic processes.

Willett (1987) described a transactions based theory of funds accounting. This paper extends the theory to explain asset and profit measurement. Eight axioms are listed which, when interpreted in the context of cost structures, are sufficient to justify the logic underlying the generation of accounting numbers in financial statements. Although the...

The article suggests a descriptive, axiomatic type of conceptual framework for conventional accounting measurement practice. The disclosure problem in financial accounting is caused by the need to decide what, of all the available numerical and nonnumerical information, to include in a set of financial reports. The measurement problem in financial...

This paper identifies, reports and analyses the issues that arose in the initial phase of the implementation process. It includes an assessment of design factors that impacted on the implementation of the scorecard. The assessment is based upon a case study at the LGA during the period between March 2000 to March 2002 and later, informal follow-up...

This paper discusses the impact of western accounting technologies on belief structures such as those of the Islamic faith. It assesses a theory of accounting reporting originally proposed by Baydoun and Willett (1994). It goes on to consider the nature and origins of western materialist philosophy and contrasts the belief structure of Islam with t...

In this paper firm parameter heterogeneity in cross section regression analysis in capital market research (CMR) is investigated. Using panel data for 30 large US firms over the period 1955 to 2004, a well-specified common form of dynamic model for each firm is identified. Average parameter estimates from these models are compared to average parame...

In this paper we show the importance of the implicit assumption of homogeneity in firm-level, time series data generating processes for valid statistical inference in cross sectional studies of the fundamental relationship between market and accounting values. We begin by showing empirically and experimentally that two common approaches to modellin...

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