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Intra-industry benchmarking of SG&A expenses: A neo-institutional perspective

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  • AERTS, Walter
  • VAN CANEGHEM, Tom
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    Abstract

    In this paper we study conformity tendencies in SG&A (Selling, General and Administrative expenses) reporting from a mimetic imitation perspective. We explore intra-industry conformity tendencies in reported SG&A relative to sales over a ten-year period among a sample of US firms. We measure conformity by comparing a firm’s SG&A profile against a reference group of industry model firms. Results suggest that a firm’s imitation of successful firms’ SG&A profiles is determined by the tendency of other industry members to imitate those reference models. Moreover, results suggest that the mimetic process is strengthened with higher environmental uncertainty and that large auditor networks function as facilitators for this type of socially-based imitation behavior. Different modes of trait imitation in SG&A reporting seem to coexist as long as the reference groups are defined in terms of size and profitability.

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    File URL: https://www.uantwerpen.be/images/uantwerpen/container1244/files/TEW%20-%20Onderzoek/Working%20Papers/RPS/2006/RPS-2006-032.pdf
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    Bibliographic Info

    Paper provided by University of Antwerp, Faculty of Applied Economics in its series Working Papers with number 2006032.

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    Length: 51 pages
    Date of creation: Dec 2006
    Date of revision:
    Handle: RePEc:ant:wpaper:2006032

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    Postal: Prinsstraat 13, B-2000 Antwerpen
    Web page: https://www.uantwerp.be/en/faculties/applied-economic-sciences/
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    Related research

    Keywords: SG&A reporting; Overhead costs; Neo-institutional theory; Cost allocation; Imitation behavior;

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    1. Burgstahler, David & Dichev, Ilia, 1997. "Earnings management to avoid earnings decreases and losses," Journal of Accounting and Economics, Elsevier, vol. 24(1), pages 99-126, December.
    2. Degeorge, Francois & Patel, Jayendu & Zeckhauser, Richard, 1999. "Earnings Management to Exceed Thresholds," The Journal of Business, University of Chicago Press, vol. 72(1), pages 1-33, January.
    3. DeAngelo, Linda Elizabeth, 1981. "Auditor size and audit quality," Journal of Accounting and Economics, Elsevier, vol. 3(3), pages 183-199, December.
    4. Chalmers, Keryn & Godfrey, Jayne M., 2004. "Reputation costs: the impetus for voluntary derivative financial instrument reporting," Accounting, Organizations and Society, Elsevier, vol. 29(2), pages 95-125, February.
    5. Aerts, Walter & Cormier, Denis & Magnan, Michel, 2006. "Intra-industry imitation in corporate environmental reporting: An international perspective," Journal of Accounting and Public Policy, Elsevier, vol. 25(3), pages 299-331.
    6. W. Aerts, 2001. "Inertia in the attributional content of annual accounting narratives," European Accounting Review, Taylor & Francis Journals, vol. 10(1), pages 3-32.
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