Recently, Kumari Ranjeeni and I have a co-authored research publication in The Accounting Review. The Accounting Review is one of the top three accounting journals worldwide and ranked number 1 by Google Scholar. It is listed as one of 24 leading business journals (UTD24) since 1990 by UT Dallas’ Naveen Jindal School of Management that is used to provide the top 100 business school rankings. It is also listed as one of 50 journals used in Financial Times research rank (FT50).
In our published research Kumari and I find results suggesting that suppliers are more willing to contract with customers who provide them with better quality accounting information. Globally, companies enter contracts for supply of goods and services. Many companies in their relationships with customers and suppliers experience problems where one party may prioritise their gains at the expense of the other party. So how do suppliers decide whether to contract a corporate customer, especially if the supplier has a lower bargaining power? To address this question, Kumari and I examined whether suppliers are more willing to contract corporate customers if they provide better quality accounting information.
Our research is important because a good contractual relationship between customers and suppliers is important for the whole supply chain, and for the economy. Selecting a wrong corporate customer (known as adverse selection) can have a disastrous effect on the supplier as the customer may not be able to fulfill its payment obligations in the future. This would eventually affect the supplier and its operations. Also, selecting a wrong corporate customer can affect future relationship between the customer and the supplier. Customers with strong bargaining power can extract benefits from suppliers whereby the survivability of the supplier may be affected.
In our research, we argue that quality accounting information is useful in helping suppliers decide about their willingness to contract corporate customers. We highlight the importance of financial reporting and its benefits for an important stakeholder – suppliers. Importantly, we show that financial reporting quality is useful in contributing to suppliers’ decision-making about contracting customers.
We find that “customers’ financial reporting quality is positively associated with future supply contracts”, (Naidu and Ranjeeni, 2024). This result suggests that suppliers are more willing to contract customers who provide better quality accounting information.
Also, “we find that the association between customers’ financial reporting quality and future supply contracts is stronger for customers with strong bargaining power”. The result suggests “that suppliers rely significantly more on customers’ financial reporting quality when they make decisions to enter future supply contracts if they have weak bargaining power. This is because suppliers may not be able to cost-effectively access customers’ private information during their contracting process. Conversely, suppliers’ reliance on customers’ financial reporting quality is lower or insignificant if they have strong bargaining power. Here, suppliers can cost-effectively access private information from customers.” (Naidu and Ranjeeni, 2024).
Collectively, “suppliers rely more on customers’ financial reporting quality in making their supply contracting decisions when they have less access to customers’ private information.” (Naidu and Ranjeeni, 2024).
Our research findings can be applied by all companies. Companies can be a corporate customer, supplier or both. Companies which are corporate customers need to provide high quality accounting information if they are seeking procurement contracts from good suppliers. Suppliers need to assess the quality of accounting information of customers they are considering contracting.
While our research is not about a general phenomenon, it can intuitively be applied by all individuals as we face decision-making scenarios daily. Generally, we need to seek and assess quality information when making decisions.
Dharmendra has been interested in supply chain, operations management and supply contracting research since he started his PhD studies at Monash University in Australia. His main research interest is within financial accounting, and he mostly teaches financial accounting. Given his interest in supply contracting, Dharmendra has been thinking how financial accounting information could benefit customers and suppliers in supply chain relations.
Kumari is also interested in financial accounting, operations management, inventory management research areas since her PhD studies at Monash University in Australia. She teaches financial accounting as well. Given her interests, she had similar questions about whether financial reporting quality can enhance trust between customers and suppliers.
Their similar interests in the research area led to many questions and discussions for several months before they decided on the key research question upon reading several academic research papers. However, this was only the first step. They encountered numerous challenges, which they successfully addressed as a team, in their journey to publication.
There were many challenges that we (Kumari and Dharmendra) had to collectively discuss and decide on as we progressed with this research. A key challenge was managing different research projects simultaneously. As an academic and an individual, we have many responsibilities and other specialized research projects, so we had to decide on how to prioritise this research. Regarding the research itself, a key challenge was developing the theoretical framework and hypotheses. This required many months of readings and rewriting before we finalized what is eventually published. The reviewers and the editor of The Accounting Review provided constructive comments and suggestions that were valuable in strengthening our research.
A key challenge in the process was disagreements between the two co-authors – Dharmendra and Kumari. There have been disagreements between us on writing sentences and paragraphs, structuring the paragraphs, theory development and constructing variables. We had to engage in constructive debate to convince each other on various occasions to finalise each step. We are glad that our strategy and open discussion has been fruitful. We thank God for enabling us to pursue and publish this research despite the challenges.
Dharmendra: I first learnt about research within the first year of joining USP as a Tutor. Before joining USP, I was working at Fiji Revenue and Customs Service. At USP, it was expected that we complete Postgraduate Diploma in Accounting (Research) and Masters by Research. Therefore, during the postgraduate studies, I attended many seminars by Prof Arvind Patel. Prof Arvind Patel exposed me to the research world, academic papers and differences between non-quality and quality publications. From the very beginning, under the guidance of Prof Arvind Patel, I have been focusing on quality research and quality publications, despite being aware of the limitations and lack of resources at USP. Prof. Arvind Patel exposed me and other colleagues to archival research, and given my interests in mathematics and programming, I was fascinated about it from the first day. However, there were many challenges, but I am glad each of the steps that I took then has contributed to my research skills, expertise and experience.
Kumari: As an undergraduate and Masters by thesis research student at USP, I have been eager to learn and do my best. I am the first Gold Medallist in undergraduate Finance degree and also first Masters by thesis research student in Finance at USP. I realized that lack of resources created many challenges during my education at USP. Nevertheless, I focused on making the best use of available resources and continued to aim for excellence. Therefore, I value my independent learning and focus on doing my best with available resources.
Dharmendra: Research is valuable and rewarding. However, research process is not easy and involves many challenges. Nevertheless, in my understanding, challenges are everywhere. As such, my advice to USP students/alumni interested in pursuing research is to be honest about their interest. If you are really interested in pursuing research then the challenges that you see are not a challenge, they are an opportunity. They are opportunities to better understand and acquire skills and expertise. In sum, I would advise you to follow your interests because challenges are everywhere. If you follow your interest, then you will see the challenges as your opportunities.
Kumari: I believe that doing research is noble and priceless! Also, it is challenging. Therefore, I believe that intent behind pursuing research really matters. As such, one needs to carefully think about the reason for pursing research.
We (Kumari and Dharmendra) are working on a follow-up research question. That is, whether corporate customers’ demand better quality audit to minimize agency costs they face in their relationship with suppliers. We are still working on this research paper and have presented it at an international conference, namely, 2024 Hawai’i Accounting Research Conference. It is still a long way towards a potential publication, and many challenges may come in the process. However, by God’s grace and our effort, we are determined to deal with the challenges. As such, we aim for the best outcome for our research.
As we gradually grow out of the disastrous effects of COVID-19, we expect more research on how we can strengthen our supply chains. Many companies faced supply chain disruptions globally due to COVID-19 and associated lockdowns. Those difficulties have led to many questions and as researchers, we expect more research to clearly identify problems within customer supplier relationships and suggest solutions.
Relatedly, Dharmendra Naidu’s PhD thesis in Accounting (Monash University in Australia) focused on the role of managerial ability in a firm’s commitment to purchase obligations and how investors perceive such commitments as implied in the firm’s cost of equity capital. His PhD thesis shows that firms with more able managers commit to more purchase obligations. The results further show that unexpected purchase obligations are associated with higher implied cost of equity capital.
Also, Kumari Ranjeeni’s PhD thesis in Accounting (Monash University in Australia) focused on the role of top management team’s ability in Just-in-time (JIT) inventory management. Due to supply chain disruptions during COVID-19, questions were raised on whether it was the end of JIT inventory system. Kumari graduated with a Doctorate Degree in Accounting just before COVID-19 started. Her PhD thesis is timely and relevant in contributing to the debate on the future of JIT inventory system. Dr Ranjeeni’s PhD research findings are as follows. “Findings suggest that managerial ability contributes to efficiency in JIT inventory management, with the extent of such efficiency being conditional on the level of discretion granted to managers and the effective monitoring of this discretion.” (Ranjeeni, 2019). Currently, her first working paper from her PhD thesis is available for reading from Social Science Research Network. She is also working on other research papers in this area.
USP alumni can play an important role as our research can benefit them and their companies. USP alumni can apply findings from our research in their businesses to contribute towards improvement in supply contracting and business relationships. We are happy to engage with anyone who prefers a meeting and more in-depth discussions on how they could apply our research. Also, USP alumni may be exposed to problems and difficulties in their businesses and industries. We are eager to understand those problems and contribute by providing solutions through research.
Finally, USP alumni can share our research news with their network so that the wider community and society can benefit from our research findings. Our research has practical implications.
Dharmendra’s LinkedIn profile link:
https://www.linkedin.com/in/dharmendra-naidu-6999413a
Kumari’s LinkedIn profile link:
https://www.linkedin.com/in/dr-kumari-ranjeeni-3408225
Anything else you would like to share with the network:
We thank God, our parents, family, teachers and schools that we attended for our learnings. We both are former staff and graduates of School of Accounting and Finance at The University of the South Pacific (Laucala Campus, Fiji). We graduated with a Doctorate Degree in Accounting from Monash University in Australia.
We appreciate our learnings from School of Acounting and Finance at USP. Special appreciation to Professor Arvind Patel for his administration, promoting quality education, research and teaching. Our first Commerce Teachers from High School are:
Our research areas include Financial Reporting, Corporate Governance, Board Gender Diversity, Supply Contracts and Corporate Finance.
Below are our research publications that are open access – you can access them freely using the DOI provided below:
Dharmendra Naidu and Kumari Ranjeeni (2024) “Is Customers’ Financial Reporting Quality Associated with Suppliers’ Decision to Contract?” The Accounting Review. Open Access for limited time only. DOI: https://doi.org/10.2308/TAR-2021-0652
Kumari Ranjeeni and Dharmendra Naidu (2024). Do Investors Undervalue Female Directors Due to Gender Role Stereotypes? Evidence from the United States. Abacus. Open Access. DOI: https://doi.org/10.1111/abac.12321
Dharmendra Naidu and Kumari Ranjeeni (2023) Shhh… Do Gender-Diverse Boards Prioritize Product Market Concerns Over Capital Market Incentives?. Journal of Business Ethics. Open Access. DOI: https://doi.org/10.1007/s10551-023-05553-3
Dharmendra Naidu and Kumari Ranjeeni (2023). Did outside directors’ firm-specific accumulated knowledge benefit the firm’s stock performance during COVID-19? Australian Journal of Management. Open Access. DOI: https://doi.org/10.1177/03128962231166831
If you use our research findings, Kumari and I would be eager to hear how you applied the findings in your setting. Please feel free to connect through LinkedIn or Facebook. Also, please appropriately cite our research if you use our findings.
PhD Thesis References:
Naidu, Dharmendra (2017). Managerial Ability, Purchase Obligations and the Cost of Equity Capital, Monash University. PhD Thesis. https://doi.org/10.4225/03/58af84803f855
Ranjeeni, Kumari (2019). Do More Able Top Management Teams Unconditionally Lead to Better Internal Operations? A Case of ‘Just-in-Time’ Inventory Management. Monash University. PhD Thesis. https://doi.org/10.26180/5c86d46fa51f8
