Activity-Based Costing is presented in accounting text books as a costing system that can be used to make valuable managerial decisions. Accounting journals regularly report the successful implementations and benefits of activity-based costing systems for particular businesses. Little experimental or empirical evidence exists, however, that has demonstrated the benefits of activity-based costing under controlled conditions. Similarly, although case studies report conditions that may or may not favor activity-based costing decision making, controlled studies that measure the actual influence of those conditions on the usefulness of activity-based costing information are few. This study looked at the decision usefulness of activity-based costing information under controlled, laboratory settings. An interactive computer simulation tested the ability of 48 accounting majors to optimize profits with and without activity-based costing information and tested to see if presentation format or decision framing would influence their outcomes. The research showed that the activity-based costing information resulted in significantly better profitability decisions and required no additional time. Presentation in graphic (bar charts) or numeric (tabular reports) format did not influence profitability decisions but the graphs took longer for analysis and decision making. Decision framing influences were shown to beneficially affect profitability decisions but did not require additional time. Decision framing was especially helpful with the non-activity based costing information; it had no significant effect on activity-based costing performance. / Ph. D.

Recent empirical findings suggest that firms might not always engage in economically optimal tax planning. We conduct a series of four laboratory experiments with 223 students and 62 tax professionals to examine whether decision biases offer a behavioral explanation for tax outcomes. We find that individuals overestimate the importance of tax rates relative to the tax base when facing time pressure in tax-planning decisions. This systematic decision bias results in suboptimal choices. In line with the theory of rational inattention, we observe that increasing tax-burden differences between two tax-planning strategies weakly mitigate the decision bias. However, tax-planning behavior is unaffected by the level of experience: students and highly experienced tax professionals are similarly prone to biased decision-making. Overall, our findings suggest that overestimating the implications of salient tax-rate information can cause decision biases and contribute to heterogeneity in tax outcomes. / Series: WU International Taxation Research Paper Series

Based on the Prospect Theory by Kahneman and Tversky (1979) and the Impression Formation Theory by Fiske and Neuberg (1990), this research examines decision makers¡¦ information attention for subjects who are required to judge under framing. The eye-tracking technology is applied to evaluate decision makers¡¦ information attention. The results indicate that, as predicted by the Prospect Theory, the effect of framing is observed in both positive and negative framed conditions. Overall, the study finds that subjects in negative frames exert more effort in information attention than those in positive frames. Concerning the effect of the need for cognition (NC) trait in negative framing conditions, the finding shows that subjects who have a higher level of NC exert more effort in information attention than the low NC subjects. In addition, subjects with high a higher level of math ability focus exert more attentional effort on possible outcomes and probabilities in positive framing but not in negative framing. Finally, the result shows that there is no relationship between information attention and the framing effect, indicating that the framing effect is resilient to the influence of information attention effort induced by both the personality traits like NC and the mechanism like deep thought. Collectively, these results pave the way for future research to study cognitive processes under framing so that we can understand how different information representations may increase or lessen the effect of framing.