A Comparative Empirical Examination of Extent of Disclosure by Private and Public Colleges and Universities in The United States

Journal of Accounting and Public Policy 21 (2002) 235275 www.elsevier.
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A comparative empirical examination of extent of disclosure by private and public colleges and universities in the United States
Teresa Gordon a, Mary Fischer b,*, David Malone c, Greg Tower d
b a University of Idaho, USA University of Texas at Tyler, College of Business Administration, 3900 University Boulevard, Tyler, TX 75701, USA c Texas Tech University, USA d Murdoch University, Australia
Abstract This study examines the annual reports of 100 United States (US) institutions of higher education to determine identiable and measurable factors associated with extent of disclosure. Each disclosure was weighted by its relative importance to users of college and university nancial statements. The measurement construct for extent of disclosure was the ratio of an institutions total disclosure score to its total possible disclosure score. Institution size and public/private status were associated with total extent of disclosure but leverage and audit rm size were not signicant. Extent of disclosure of non-nancial performance information (service eorts and accomplishments) was associated with high tuition rates and low dependence on tuition revenue and with state auditors as opposed to public accounting rm auditors. The ndings are consistent with accountability and public interest tenets (Coy, D., Fischer, M., Gordon, T., 2001. Public accountability: a new paradigm for college and university annual reports. Critical Perspectives on Accounting 12 (1), 131). Highly visible institutions, those larger in size
Corresponding author. Tel.: +1-903-566-7433; fax: +1-903-566-7372. E-mail address: mscher@mail.uttyl.edu (M. Fischer).
0278-4254/02/$ - see front matter 2002 Elsevier Science Inc. All rights reserved. PII: S 0 2 7 8 - 4 2 5 4 ( 0 2 ) 0 0 0 5 1 - 0
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T. Gordon et al. / Journal of Accounting and Public Policy 21 (2002) 235275
or audited by the state, disclosed more information. Moreover, some institutions used a corporate-style report to better promote their interests. 2002 Elsevier Science Inc. All rights reserved.
1. Introduction The United States (US) has the worlds largest private sector of higher education comprising 55.2% of its 3561 colleges and universities. 1 Private and public institutions in all categories compete for students, from prestigious research institutions to liberal arts colleges to two-year community colleges. Accountability by private non-prot colleges and universities entails unique issues because these institutions are not subject to the electoral control which holds government accountable and because they are often insulated from the market forces that discipline business entities due to their (sometimes) extensive endowments. Nevertheless, US colleges and universities of all types are faced with an increasingly adverse and turbulent environment including a declining college-age population 2 and reductions in federal support for research. Many institutions are being forced to establish stronger ties with business to replace federal support. Baron and Grunewald (1995, p. 219) suggest that the line between prot and non-prot institutions is blurring as choices for academic institutions narrow. Despite the similarities among institutions of higher education, nancial reporting for the industry is regulated by two dierent entities (Fischer, 1997, p. 255). The Financial Accounting Standards Board (FASB) is responsible for private not-for-prot institutions (and the small number 3 of proprietary schools). The Government Accounting Standards Board (GASB) is responsible for public institutions (Fischer, 1997, p. 254). Objectives for nancial reporting
According to the US Department of Education, there were 1595 public and 1966 private institutions of higher education in 1994 (National Center for Education Statistics, 1996, p. 216). The majority (88%) of public institutions are state operated. Most private institutions are private not-for-prot entities (84%) rather than proprietary or for-prot entities (16%). Over half (56%) of the not-for-prot schools are religiously aliated (Snyder et al., 1996, p. 184). 2 High school graduates reached a low in 19931994 (the year of the nancial statements used in this study). High school graduates were projected to increase slowly and then drop back down to the 19931994 level in 20012002 after which the number of graduates will again begin to grow steadily and eventually exceed the baby boom numbers by 2009 (Western Interstate Commission for Higher Education et al., 1993, p. 1). 3 Less than 2% of higher education students were enrolled in the 314 proprietary institutions of higher education in the US in 1994. However, both the number of institutions and proprietary enrollment had increased 20% between 1985 and 1994, as compared with a 17% overall increase in enrollment (Snyder et al., 1996, pp. 174227).
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espoused by the two boards are not identical. The FASBs primary focus is on providing information that is useful to resource providers in making rational decisions about the allocation of scarce resources to business and non-prot organizations (FASB, 1980, para. 35). The GASB also endorses decision usefulness but states accountability is the cornerstone of all nancial reporting in government (GASB, 1987, para. 56). From an ethical perspective, accountability implies a willingness to endure public scrutiny, even an invitation for the public to scrutinize the behaviors of the organizations leadership and this duty to report is not limited only to the minimum required by law (Lawry, 1995, p. 175). The annual nancial report produced by most entities is one way they can meet their duty to be accountable to their stakeholders and to society at large. In 1995, the FASB implemented Statement of Financial Accounting Standards (SFAS) Nos. 116 (FASB, 1993a) and 117 (FASB, 1993b) representing a signicant divergence between private and public college and university (C&U) nancial reporting (Fischer, 1997). Prior to implementation, both the FASB and the GASB recognized the AICPA/NACUBO 4 model for reporting the nancial results of colleges and universities. The current study uses the annual reports of C&Us from 1994, just prior to the implementation of SFAS Nos. 116 and 117. Various authors have written on the diverse goals represented in higher education (e.g., Brinkman, 1984, pp. 37; Gardner et al., 1985, pp. 914; Geiger, 1986, pp. 241249; Zemski, 1996, pp. 114). As reporting practices diverge between public and private institutions with the adoption of SFAS Nos. 116 and 117, our study provides a much needed baseline examination of the factors associated with nancial disclosure within these two types of entities. 5 As stated earlier, there are both similarities and dissimilarities between public and private institutions and their association with nancial reporting practices. The current study falls within a positive theory framework, as that term is used by Watts and Zimmerman (1986, pp. 49), since it attempts to explain accounting and reporting practices by (1) identifying those factors associated with nancial reporting common to both public and private C&Us,
4
The earliest recommended uniform reports for colleges and universities date back to the rst decade of the 20th century (Brown, 1993, p. 2). The AICPA/NACUBO model refers specically to the industry audit guide published by the American Institute of Certied Public Accountants (AICPA, 1973) and the manuals and guidelines issued by the National Association of College and University Business Ocers (NACUBO, 1990). 5 Changes in the nancial reporting requirements for public institutions are underway. See Engstrom and Esmond-Kiger (1997) for a comparison of the FASB model and the proposed GASB model for college and university reporting. GASB issued its Statement No. 35 (1999b) amending Statement No. 34 (1999a) to include public colleges and universities. The new reporting model based upon full accrual recognition and highly aggregated presentation narrows the divergence between public and private college and university nancial reporting. Signicant dierences continue to exist due to dissimilar denitions, classications and display criteria.
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and (2) identifying those factors unique to public and private institutions respectively.
2. Service eorts and accomplishments C&Us, whether public or private, do not have a single convenient indicator of performance comparable to net income, return on investment, or earnings per share. Many resource providers of C&Us are not direct beneciaries of the services provided and are not in a position to ascertain the quality or quantity of services provided, nor the eciency with which resources are consumed. Consequently, both the GASB and FASB emphasize the importance of information about the eciency and eectiveness of both service eorts and accomplishments (SEA). Both boards recommend that non-business organizations supplement their nancial statements with non-nancial SEA measures. In particular, the GASB (1994) has emphasized the need for experimentation with SEA measures. Examples and detailed recommendations (e.g., Gordon and Fischer, 1990, pp. 2931; Fischer and Gordon, 1991, pp. 36 40; Hatry et al., 1990, pp. 5769) as well as documentation of misleading measures (Cave et al., 1991, pp. 172173; Stecklow, 1995, p. A6) have been published but there is little information on the extent to which SEA reporting has been implemented within the context of nancial reporting.
3. Extent of disclosure literature Explanations for variations in the amount of information disclosed by economic entities in the US have been approached from several perspectives (e.g., rms listing a new stock issue (Copeland and Fredericks, 1968), ventures into foreign markets (Choi, 1973), or from a more positivistic perspective, exploring rm characteristics such as size, listing status, leverage, audit rm size, etc., (Cerf, 1961; Buzby, 1974, 1975; Malone et al., 1993)). Disclosures in other countries have also been examined (e.g., Baker et al., 1977; Firth, 1979; McNally et al., 1982; Chow and Wong-Boren, 1987; Wallace and Naser, 1995). 6 There are few studies of C&U reporting in the US (an example is Peat Marwick Mitchell & Co. (1985) review of annual reports). However, several studies have examined the quality of reporting practices among public universities in other countries including Great Britain (Gray and Haslam, 1990),
6 In the area of government reporting, Plewa (1983, p. 124) compared disclosures made by municipalities with audited versus unaudited annual reports. A synopsis of the ndings of these earlier studies are provided later in the paper as we develop the hypotheses to be tested.
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New Zealand (Dixon et al., 1991, 1994; Coy et al., 1993, 1994) and Ontario, Canada (Banks and Nelson, 1994). Unlike typical extent of disclosure studies which tend to be cross-sectional in nature, these quality of disclosure studies are longitudinal, designed primarily to assess changes over time for individual institutions rather than to identify explanations for dierences in disclosure practices among entities. Our study contributes to the literature in two ways. First, it provides the rst comprehensive study of extent of nancial disclosure by US institutions of higher education. Second, most prior research of C&U disclosures ignored private institutions. The current study includes both public and private institutions and hypothesizes a dierence in motivations for disclosure between the two categories, particularly with respect to SEA disclosures. The eect of dierences in reporting standards between public and private institutions is minimized by using 1994 data, prior to the adoption of SFAS 117 by most private schools. 7 The remainder of the paper is organized as follows: rst, hypotheses to be tested are discussed; second, methods used in the study are outlined; and nally, results are reported.
4. Hypotheses development In attempting to assess the determinants of disclosure by C&Us, our study examines the sample in three dierent groupings: total sample (i.e., public and private C&Us), public C&Us, and private C&Us. There are certain characteristics that are common to any economic entity including C&Us that may help explain the extent of disclosure of that entity. For both public and private C&Us, those characteristics might include size, various congurations of assets and debt, governance, and audit status. Public institutions, while sharing the above characteristics with private ones, are unique in their relationship to state government, including their relationship with the state auditor (Baber, 1983, p. 226). Because of the public support aorded these institutions, there may be increased monitoring on the part of the state because of the increased proportionality of their stake in the nancial and operational aairs of the school.
7 Of the 100 institutions included, 90 were following the AICPA audit guide, three were early adopters of SFAS No. 117 (FASB, 1993b), although not SFAS No. 116 (FASB, 1993a), and four others were using either the government model or a mix of government and AICPA audit guide formats. The remaining three institutions reports could not be classied and the notes to the nancial statements (if any) were vague with respect to the specic standards being followed.
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Private schools depend heavily on student tuition and fees and on private donations and gifts. Endowments, therefore, take on a special signicance in the private institution relative to the public institution. Additionally, SEA may take on special signicance to potential contributors and other resource providers. In our study, SEA disclosures are used as a dependent variable in ve of the hypotheses. 4.1. Total extent of disclosure A disclosure index comprises items that are expressed as a ratio of the actual scores of a company compared to the scores which that company is expected to earn (Cooke, 1991, p. 180). It is created to measure the relative level of disclosure by an enterprise. Disclosure indices have been used in many voluntary disclosure studies (for example, Lim and McKinnon, 1993; Hossain et al., 1994; Hossain and Adams, 1995; Dixon et al., 1994) on the grounds that the dependent variables used in these studies are not directly measurable (Marston and Shrives, 1991, pp. 197200). Furthermore, Cheng (1992, p. 2) notes that early studies of the practices of government entities had relied on measures such as length of nancial report, whether the nancial statements were audited and by whom, the size of the state audit budgets as surrogates for the extent and quality of disclosure. However, due to the existence of multicollinearity between and among the independent variables, data reduction methods had employed dierent measures for the similar constructs (Ingram, 1984, p. 139; Banker et al., 1989, p. 37; Giroux, 1989, p. 211). As such, selecting specic variables to explain disclosure practices, in the public sector, is not desirable (Cheng, 1992, p. 2). Hence Cheng (1992, p. 36) supports the notion of disclosure indices to measure the extent of disclosure by enterprises. This approach has been widely used in public sector studies (see Ingram, 1984, pp. 134137; Robbins and Austin, 1986, pp. 413417; Banker et al., 1989, p. 30; Giroux, 1989, p. 208; Cheng, 1992, p. 28; Lim and McKinnon, 1993, pp. 202 203). 4.1.1. Institution size Perhaps the most prevalent explanatory variable in the extent of disclosure literature is size of the organization. 8 Foster (1986) suggests that the positive relationship that appears to exist between rm size and extent of nancial disclosure can be a function of several possible underlying factors, including
For the constructs size and audit rm size, our choice of measurement was inuenced signicantly by the extant disclosure literature. Wallace and Naser (1995, pp. 316317) oer an excellent review of that literature. Rather than replicate that discussion here, we incorporate it by reference.
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increased political costs associated with larger rms, lower competitive costs of marginal disclosures by larger rms, and economies of scale enjoyed by larger rms in the production of information (p. 44). In response to the political cost problem, Leftwich et al. (1981, p. 57) argue that increased nancial disclosure can help to oset monitoring problems arising from increases in organization size. Their argument also holds true when there is a dispersion of monitoring agents in place such as larger governing boards (Ingram, 1998, p. 12). As an economic construct, size can present dicult measurement issues. Foster (1986) provides guidance on measure of rm size, listing total assets, sales, and market capitalization (p. 111) as possible measurable surrogates. For colleges and universities, market capitalization does not present a measurable value (with the possible exception of C&U tradable debt securities). However, assets and revenues are measurable in the C&Uswith some caveats. Under the accounting model used in 19931994, many institutions made no attempt to eliminate interfund accounts receivable and payable, thus inating total assets. 9 A more serious problem is the valuation of plant assets. Since a C&U can be hundreds of years old, with xed assets dating to the inception of the institution, total assets of dierent universities can be fraught with systematic dierences. In addition to the usual problems with historical cost accounting for assets with long lives, private institutions record depreciation on plant assets (FASB, 1987) but most public institutions do not (GASB, 1988). This study uses adjusted gross assets (GASSETS), computed by adding back accumulated depreciation to total assets and removing interfund receivables (if necessary), in order to make public and private institutions as comparable as possible. As suggested by Ott (1993, p. 457) the natural log of gross assets was used because of the original independent variables tendency to produce a nonlinear distribution of error terms in the model. A hypothesis, stated in its alternate form, is suggested by these arguments: Ha1: Colleges and universities with higher levels of gross assets disclose nancial information to a greater extent than their smaller counterparts. 4.1.2. Governance The governing boards of colleges and universities are most commonly called a board of regents or a board of trustees. 10 For the purpose of this study, no distinction is made among either of these forms, or the others that exist. Of
9
Under GASB (1991, para. 154) Statement No. 14 entity-wide totals were optional and elimination of interfund receivables and payables was not required. 10 The governing board of 66 institutions was named board of trustees, 20 used board of regents, and three reported a board of governors. Other governing board names reported by an institution included curators, overseers, visitors, managers, supervisors, governor and trustees, board of trust, agriculture, the corporation, and higher education.
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immediate concern is simply the number of members of the governing board. It seems clear, however, just from casual observation that boards of dierent institutions take on their own character. There may be asymmetries among boards that could explain dierent levels of monitoring in place. For example, some boards are elected, while others are appointed. Some boards have student and/or faculty representatives while others do not (McGuinness et al., 1994, pp. 107129). These and other asymmetries are beyond the scope of this study. Much of the literature on governing boards addresses the eect of outside directors as a monitoring device (e.g., Rosenstein and Wyatt, 1990; Fosberg, 1989; Fama and Jensen, 1983). Boards of C&Us are composed almost exclusively of outside directors, who are normally either appointed by an external agent (e.g., the governor of a state) or elected by the existing board members (Madsen, 1998, p. 10). These boards also take on a diverse nature, with board members coming from diverse racial, gender and experiential backgrounds (Madsen, 1998, p. 4). Ingram (1998, p. 12) recommends that boards be increased to facilitate improved trusteeship. Supporting that belief is an earlier nding by Moisan (1992, p. 10) that the general eectiveness of a board was inuenced by its size. The current study proposes that as members are added to the board, there is a perceived need for higher levels of monitoring. Among private institutions, large boards may also be desired because of the enhanced fundraising that may result from having inuential and wealthy potential donors serving on the board (Ingram, 1998, p. 14). Both justications for large boards are consistent with a positive relationship between board size and extent of disclosure, resulting in the following hypothesis, again stated in alternate form: Ha2: Colleges and universities with more members on the governing board disclose nancial information to a greater extent than do those with fewer members. 4.1.3. Public versus private Public institutions are larger than private C&Us in terms of current fund revenues and enrollment. 11 Therefore, the nature of the population makes it dicult to avoid this systematic dierence. Apart from considerations of size, however, public institutions may be exposed to greater political costs, due to
11 Geiger (1986, p. 164) reports that only ve of the 60 largest universities in the US are privately controlled. Based on our examination of a primary data source, the Department of Educations National Center for Educational Statistics, we found that the 19931994 current fund revenues of private institutions averaged $32,250,000 as compared to $65,519,000 for public institutions. From the same source, Fall 1993 enrollment in private institutions averaged 1552 as compared to 6886 for public institutions. The data from which these averages were computed are available at http:// nces.ed.gov.
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the greater number of constituents to which they are responsible (Kurtenbach and Roberts, 1994, p. 230). These constituents include taxpayers, the legislature, and assorted politicians (in addition to students, alumni, bondholders and accrediting bodiesconstituent interest groups relevant to both public and private schools). Private institutions are not generally subjected to this additional scrutiny (with the possible exception of additional incentives to disclose SEA information, as discussed earlier). As such, when holding all other factors constant, one would expect public institutions to make more extensive disclosures consistent with their multifaceted stewardship roles. The third alternate hypothesis of the study is thus suggested: Ha3: Public colleges and universities disclose nancial information to a greater extent than do private ones. Classifying C&Us into the categories of public and private is relatively straightforward with one exception. One land grant university from each state was selected to represent public institutions in our study. However, Cornell, a private non-prot institution, is the land grant institution in New York. The colleges that comprise the land grant activities at Cornell were established by New York State statute to participate in the Morrill Act of 1862 (Carren, 1958, p. 13). For the purposes of our study, Cornell is classied as private. Using a simple dichotomy for the public versus private dimension has potential aws. The concept of public responsibility for higher education took a long time to develop in the US. The earliest private institutions (e.g., Harvard and Yale) received public support and some of the earliest state universities (e.g., Georgia and North Carolina) were more nearly private than public, often with self-perpetuating rather than state appointed governing boards (Brubacher and Rudy, 1976, p. 145). Regular patterns of tax support for state universities became more common after the Civil War and the Morrill Act of 1862 (Hofstadter and Smith, 1961, p. 568). Since the second Morrill Act of 1890, land grant universities have received appropriations from the federal government, and state legislatures were spurred to follow suit (Hofstadter and Smith, 1961, p. 568). However, the resulting level of state support is far from uniform. 12 Both private and public colleges and universities receive student nancial aid and research grants from federal, state and local governments. 13
12 Based on an examination of an original data source, the US Department of Educations National Center for Education Statistics (NCES), we found that the 19951996 state appropriations for higher education ranged from $2071 to $6048 per enrolled student with a mean of $3843. The data from which these averages were computed are available at http://nces.ed.gov. 13 According to the NCES, private institutions received 17.6% of their 19931994 revenues from federal, state and local governments as compared to 50.9% for public institutions of higher education. This data is available at http://nces.ed.gov.
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Some states, particularly those with large private sector enrollments, provide generous state aid to private institutions (Geiger, 1986, p. 212). However, we were unable to develop a sound alternative construct for the public versus private dimension. Too many institutions (primarily the private schools) in our sample commingled private and governmental support in their nancial statements. 4.1.4. Audit rm size The size of the audit rm and audit status (audited versus unaudited nancial statements) have been shown to impact nancial disclosure (Banker et al., 1989, p. 52; Baber, 1983, p. 221; Rubin, 1992a, p. 162). Wright (1974, p. 631); DeAngelo (1981, p. 190); Deis and Giroux (1992, p. 477) and Malone et al. (1993, pp. 254255) argue that smaller certied public accounting (CPA) rms are more sensitive to client demands than are larger CPA rms and thus generally are associated with lower levels of disclosure. The sample in this study is comprised of major universities, and most provide nancial statements audited by public accounting rms (76% were audited by Big-6 CPA rms). 14 However, in some states, governmental units are audited by a state agency. The type of rm doing the audit may be an important inuence on the extent of disclosure of both nancial and non-nancial information (Sanders and Allen, 1993, pp. 7375; Raman and Wilson, 1992, pp. 272275). Rubin (1992a, p. 174 and 1992b, p. 35) reported that municipal nance ocers had the perception that state auditors were at a disadvantage compared to independent public auditors with respect to their eciency and expertise. On the other hand, state auditors do not routinely weigh the risks of malpractice lawsuits and may be less concerned about including voluntary (unaudited) non-nancial indicators with the annual reports they audit (Copley, 1989, p. 21; Raman and Wilson, 1994, p. 519). The number of C&Us in our study that was not subjected to an audit was too small to test. The fourth alternate hypotheses, therefore, is: Ha4: Colleges and universities that are audited by Big-6 CPA rms disclose nancial information to a greater extent than do those audited by smaller CPA rms or that are subject to state audit. 4.1.5. Leverage Jensen and Meckling (1976, p. 338) and Daley and Vigeland (1983, pp. 208 209) argued that rms with a greater proportion of debt, that is more highly leveraged rms, will incur higher monitoring costs. Myers (1977, p. 161) and
14 At the time of this study, there were six major CPA rms operating in the US (Arthur Andersen LLP, Coopers & Lybrand LLP, Deloitte & Touche LLP, Ernst & Young LLP, KMPG Peat Marwick LLP, and Price Waterhouse LLP).
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Schipper (1981, p. 87) explained this as a result of conicts that exist between debtholders and stockholders. Because stockholders have an incentive to expropriate claims from debtholders, and subsequent debtholders have incentives to expropriate claims from prior ones, debt covenants arise that may result in additional disclosure requirements. While universities do not have stockholders, many issue debt securities, thus suggesting the fth alternate hypothesis: Ha5: Highly leveraged colleges and universities disclose nancial information to a greater extent than do less leveraged ones. 4.2. Public colleges and universities The activities of public institutions are principally focused within the state and targeted toward the education of state residents (Gardner et al., 1985, p. 18). To dierent degrees, members of state legislatures and other oversight boards can be quite familiar with their constituent institutions, reducing the need for certain discretionary disclosures. This is due to the many unique relationships that exist across the US between C&Us and their respective state governments and populations. In every state, there is but one state legislature. In some states, there is one governing board for all of the states public institutions of higher learning (McGuinness et al., 1994, pp. 77102). The extent to which attention is focused on individual schools and the extent to which governing ocials are intimate with the details of the operations of schools will vary dramatically from state to state (Brubacher and Rudy, 1976, pp. 143173). For example, in Wyoming, there is only one four-year schoolthe University of Wyoming. There is not a legislator or trustee in Wyoming who is not thoroughly familiar with the nancial condition and budgetary concerns of the university. 15 In a state like California or New York, however, legislators may be hard pressed even to name all the public institutions in the state much less be expected to know the pressing nancial issues at each campus. A single governing board is created in many states to govern all public institutions in the state. This probably results in standardized formats for collecting and compiling extensive higher education nancial information for the state. The reporting and dissemination of nancial information by the individual institution to the consolidated board should result in added disclosure in part due to the volume of available data the board needs to govern a large,
15 Information provided by Richard H. Miller, Special Assistant to the President of the University of Wyoming. Mr. Miller was the Director of the Wyoming State Legislative Service Oce from 1988 to 2000. E-mail address: rmille@uwyo.edu.
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complex system. By this reasoning, the current study proposes the following alternate hypothesis: Ha6: Schools located in states with a single (consolidated) governing board will disclose nancial information to a greater extent than schools in those states with multiple, relatively decentralized (uncoordinated) governing boards. Proles, roles and responsibilities of governing boards of public higher education institutions in each state was found in the State Postsecondary Education Structures Handbook (McGuinness et al., 1994, p. 10). 4.3. Extent of SEA disclosure Universities strive for educational excellence and institutional prestige and there is virtually no limit to the amount that can be spent toward these ends (Geiger, 1986, p. 200). This may cause them to make available certain information that is perceived to enhance their reputation. In the US, there have been three principal ways of feeding higher educations voracious nancial appetiteendowments, taxes, and tuitions (Brubacher and Rudy, 1976, p. 377). The remaining hypotheses relate to a subset of the overall extent of disclosure scoresthose related to SEA and other non-nancial indicators including enrollment, acceptance rate, etc. As discussed earlier, both the FASB and GASB have endorsed the need for non-nancial indicators (SEA) to make nancial statements fully informative. 16 Nevertheless, this type of reporting is often published in university fact books rather than annual reports (Fischer and Gordon, 1991, p. 42). With this caveat in mind, the arguments with respect to SEA disclosures are developed separately for private and public institutions. 4.3.1. Private colleges and universities While private C&Us are more dependent on tuition than public institutions, there is considerable variation among private schools. Many private institutions attract students on the basis of their unique approach to education (including sectarian) or their academic prestige (Geiger, 1986, pp. 189195). Such schools must be able to market their product and justify their claims of superiority to a greater extent than public institutions whose tuition rates are usually much lower (Geiger, 1986, p. 166 and pp. 176185). Geiger (1986,
16 SEA is discussed in both conceptual frameworks (FASB, 1980, para. 47; GASB, 1994) although neither standard setting body has yet mandated SEA disclosures. In addition, both boards have sponsored research studies on the topic (for example Brace et al., 1980; Hatry et al., 1990).
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p. 169) puts forward the paradoxical generalization 17 that the higher the tuition a private college or university charges, the less tuition-dependent the institution is likely to be. The highest tuition rates are charged by private institutions that have other substantial sources of income such as research universities and highly selective liberal arts colleges (Geiger, 1986, p. 169). Conversely, less selective private schools often have few other sources of income and are highly dependent on tuition (Geiger, 1986, p. 169). Many of these schools were established to satisfy unmet needs for higher education in a particular area rather than to set standards for academic prestige. 18 The other major source of income for private schools is endowment income and voluntary gifts. 19 Institutions with relatively high levels of endowment assets may have developed a trust relationship between the institution and its supporters and this relationship may be maintained and enhanced by disclosures about the institutions accomplishments. Most contributions to C&Us come from alumni and almost all institutions have ways of keeping in touch with their graduates. 20 Alumni support is closely related to the undergraduate, residential education experience and few commuter students develop deep attachments to their schools (Geiger, 1986, p. 173). The following alternate hypotheses are thus suggested: Ha7: Private colleges and universities whose operations are proportionally less reliant on tuition and fee revenues will disclose SEA information to a greater extent than do those more reliant on tuition and fees. Ha8: Private colleges and universities with large endowments will disclose SEA information to a greater extent than do those with smaller endowments. Ha9: Private colleges and universities that charge higher tuition fees disclose SEA information to a greater extent than do those that charge lower tuition fees.
17 One explanation for the paradox is that high tuition rate schools often provide tuition discounts that are reported as scholarship expense. Thus the tuition revenue reported may not be realized in cash making these schools actually less tuition dependent than appears on the surface. 18 Geiger (1986, p. 185) notes that before 1960 state legislators had a decided bucolic bias in the placement of colleges which left unmet needs for higher education in urban areas. The private institutions that arose to ll the gap were relatively indistinguishable in mission from public institutions. During the 1960s, a number of these private universities (e.g., Houston and Pittsburgh) became state controlled. 19 According to the NCES, the largest sources of 19931994 current fund revenues for private institutions were 64.5% from tuition, fees and sales, 17.6% from federal, state and local governments, and 13.5% from endowment income and private gifts and grants. This data is available at http://nces.ed.gov. 20 Engstrom (1988, p. 14) found that 1.8% of institutions sent complete nancial reports to their alumni. About a third of the institutions (38% of privates) sent condensed reports that did not include an auditors opinion (Engstrom, 1988, p. 14).
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4.3.2. Public versus privateSEA Public institutions also rely on tuition and many have sizable endowments. However, they are supported by the third source of fundingtaxesand this increases their duty to be accountable (Coy et al., 2001). They disclose information to satisfy stewardship interests that arise based primarily on a public service function (i.e., providing higher education to the residents of the state). Since all land grant schools have similar missions, few systematic dierences in extent of SEA disclosure are anticipated. However, as argued earlier, state auditors may be more willing than public accounting rms to be associated with SEA disclosures. In contrast to public C&Us, private institutions may have a variety of missions and objectives (e.g., sectarian or single program such as the College of Insurance in New York). Schools that compete on the basis of prestige (often indicated by high tuition rates) and those with greater alumni support, have stronger incentives to provide a more extensive set of non-nancial performance measurements. One would expect that this would lead to a higher extent of disclosure among private institutions, ceteris paribus. The following alternate hypotheses are suggested: Ha10: Public colleges and universities audited by state auditors disclose information about SEA to a greater extent than do those audited by public accounting rms. Ha11: Private colleges and universities disclose SEA information to a greater extent than do public ones. 5. Methodology This section discusses the methods employed in testing the hypotheses of the study. First, the population and sample selection procedures are detailed. We then discuss the procedures used in the content analysis of the annual reports. Next, the means by which extent of disclosure by the C&Us was measured are discussed. Finally, the section species the models and statistical methods used to test the hypotheses. 5.1. Population, working population and sample There were 3362 institutions of higher learning in the US in 19931994, dening the population. Of these, 60.3% were four-year institutions that granted bachelors degrees. 21 To examine extent of nancial disclosure,
21
Statistics were derived from a primary data source, the National Center for Education Statistics, available at http://nces.ed.gov.
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a national sample, evenly divided between public and private institutions, was used. Smaller public and private institutions have broadly diverse missions, necessitating severe restrictions in the working population, loosely dened as large, nationally prominent institutions. This restriction limits the ability to extend the results of this study to smaller, systematically dierent types of institutions. In selecting a sample, we chose land grant schools 22 to generally represent public institutions because they had the advantage of their land endowments to make them somewhat more comparable to private institutions which often have substantial gift endowments. To control as much as possible for dierences in mission and to recognize that certain programs are more resource intensive than others (e.g., engineering versus history), private institutions with accredited engineering programs (the mechanical arts portion of the Morrill Act) were chosen as the sample of private institutions. All 50 land grant institutions have accredited engineering programs and oer other generally comparable programs such as agriculture and forestry. 23 Under the Carnegie system, 78.0% of the 50 land grant schools were classied as Research I or II and the remaining 22.0% were classied as Doctoral I or II or Comprehensive I or II. 24 Consequently, we did not include in our sample any private institutions that were classied as specialized engineering programs or liberal arts colleges. 25 The variable PUBLPRIV is coded 1 for public institutions and 0 for privates. Letters requesting their annual report for the scal year ending in 1994 were sent to the 50 land grant universities and all 91 private institutions with accredited engineering programs and the appropriate Carnegie classication. The response rate from the land grant schools was 100% and the response rate from the private institutions was 73.6%. Two of the private schools declined to participate, seven sent 19941995 statements instead
22
The land grant schools had their ocial origin with the Morrill Act of 1862 which provided federal lands to endow state universities dedicated to the agricultural and mechanical arts (Brubacher and Rudy, 1976, p. 63). However, the federal government had already donated 4,000,000 acres of public land to endow universities in 15 states before the Morrill Act (Brubacher and Rudy, 1976, p. 154). Cornell postponed selling and realized the largest amount ($5 million) and a few other schools realized almost a million dollars but 17 states realized $150,000 or less (Brubacher and Rudy, 1976, p. 379). Compare this to the $3.5 million Johns Hopkins bequest and the $20 million Leland Stanford bequest (Brubacher and Rudy, 1976, p. 377). 23 Engineering accreditation is the only program accreditation shared by all 50 land grant institutions (Higher Education Directory, 1993, pp. 489490). The next most common accreditation is business with 46 of the 50 land grant institutions having AACSB accreditation (Higher Education Directory, 1993, pp. 483484). 24 Classication was determined based on an original data source, The Carnegie Foundation for the Advancement of Teaching, 1994. This document is currently available at http://www.carnegiefoundation.org/Classication/. A new classication system is being released in 2000 with more changes anticipated by 2005. 25 The private institutions in the nal sample included Research (43.1%) and doctoral or comprehensive (56.9%).
250
of 19931994, and one school had to be excluded because it had already implemented SFAS Nos. 116 and 117 (FASB, 1993a,b). This left a sample of annual reports from 49 public land grants, one private land grant, and 57 private institutions. When a state was represented by the annual report of only one private institution, that school was selected for the study (10 states). When reports were received from multiple private institutions in a state, one was randomly selected (19 institutions). The remaining reports provided a pool of 28 schools from which 21 additional private institutions were randomly selected to bring the total sample to 100 colleges and universities. As shown in Table 1, private four-year institutions are more numerous than public institutions of higher learning in the overall population (63.5% versus 36.5%). However, public schools are much larger than the privates, with 69.5% of the total enrollment of all four-year institutions. The private institutions
Table 1 Private versus public comparison: sample institutions, working population of accredited engineering programs, and general population of four-year institutions Institutions included in study Number Enrollment Public institutions Private institutions Total Number of institutionsb Public institutions Private institutions Total Carnegie classication Doctoral granting schools (Research I and II and Doctoral I and II) Masters granting schools (Comprehensive I and II) Other four-year institutions (Liberal Arts and Specialized) Total
a
a
Accredited engineering programs Number 3,388,122 808,024 4,196,146 193 110 303 153 Percentage 80.7 19.3 100.0 63.7 36.3 100.0 50.5
General population Percentage 69.5 30.5 100.0 36.5 63.5 100.0 11.3
Percentage 75.8 24.2 100.0 49.0 51.0 100.0 80.0
1,479,105 471,965 1,951,070 49 51 100 80
20
20.0
114 36
37.6 11.9
25.3 63.4
100
100.0
303
100.0
100.0
Enrollment gures for Fall 1993 were obtained from the 1993 Higher Education Directory along with the list of 303 accredited engineering programs. General population percentages and Carnegie classication percentages were derived from Carnegie Foundation for the Advancement of Teaching (1994) data. b Cornell, while a land grant institution, is considered a private school under the Carnegie classication and its enrollment is included with the other private institutions. Therefore, there are 49 public land grant institutions presented in the table above.
251
included in our study are some of the largest private schools in the nation, but as a group their enrollments are much smaller than those at public land grant institutions. Public land grant schools included in the study represent 75.8% of the total enrollment but only 49.0% of the institutions. Private institutions represent 24.2% of the enrollment but 51.0% of the institutions. Based on our analysis of primary data sources (see Table 1), schools included in our study as well as schools with accredited engineering programs are heavily skewed toward the more prestigious doctoral granting institutions in terms of both number and enrollment. Doctoral granting schools comprise 80.0% of the institutions included in our study. In comparison, only half of accredited engineering programs are oered at doctoral granting institutions (50.5%). With respect to size of student body (not shown on Table 1), enrollment at the doctoral granting institutions in our study is 90.3% of the enrollment of all the institutions in our study. In comparison, enrollment at doctoral granting schools that oer accredited engineering programs is 70.8% of the total enrollment in accredited engineering programs. Enrollment in doctoral granting institutions is only 44.1% of the enrollment at all four-year institutions. Schools included in our study are reasonably representative of accredited engineering programs with respect to geographic location. While the sample includes, on average, two institutions from each state, 19 states do not have any private institutions that oer an accredited engineering program (Higher Education Directory, 1993, pp. 489490). Responses were not received from the private institutions in six other states. Consequently, 25 states are represented only by their public land grant institution. 5.2. Content analysis procedures Engstrom (1988) examined the information requirements of a diverse set of users of college and university annual reports. Through the use of an advisory board, personal interviews with vested parties, and a mail survey, Engstrom (1988, pp. 133144) identied 76 disclosures of potential interest to nancial statement users. Subjects in identied user groups were then asked to rate the relative importance of each of the items in a second mail survey. The disclosure items rated by Engstroms (1988) respondents provided a list of desirable but primarily voluntary disclosures that served as the basis for our disclosure index scores. The 19931994 annual reports, obtained from the 100 institutions of higher learning described above, were analyzed using content analysis procedures to quantify the extent of disclosures (for a thorough discussion of content analysis, see Holsti, 1969). To guide the content analysis procedure and help assure consistent coding, we developed an instrument for internal use that included the relevant items from the Engstrom (1988) study as well as organizational
252
characteristics and certain monetary amounts. A binary coding system was used for all the Engstrom (1988) disclosure items: the item was scored 1 if the disclosure was present and 0 otherwise. We made no attempt to give additional weight for the quality or quantity of the disclosure. For example, an institution with enrollment data for ve years was scored the same as an institution that reported 10 years of enrollment data with breakdowns by gender and race. The instrument was pretested on 10 annual reports and then expanded with instructions to help ensure consistency among scorers. Each annual report was then scored by two of the authors and discrepancies were resolved. On average, the interscorer agreement rate was 84.8%. Most discrepancies were errors of omission and were easily resolved. To insure consistency over time, the rst 10 instruments were re-scored at the end of the data collection phase and the agreement rate was 98.0%. 5.3. Measuring extent of disclosure Our study focuses on the extent of nancial disclosure of public and private US colleges and universities (C&Us). Certainly, the denition of nancial disclosure is subject to many interpretations, perhaps ranging from the information provided in audited notes and nancial statements to any information set that might be employed by a user in arriving at some decision about the economic entity at hand. In our study, the nancial disclosures examined are those found in the annual report supplied by the institution. Information in other documents was not considered. Measurement of extent of disclosure has a strong foundation in the accounting literature. Most of those studies have used a predetermined list of disclosures that nancial analysts and/or loan ocers deemed important in the investment decision process (see for example Cerf, 1961; Copeland and Fredericks, 1968; Singhvi and Desai, 1971; Choi, 1973; Buzby, 1974, 1975; Plewa, 1983; and Chow and Wong-Boren, 1987.) Both weighted and unweighted indices have been used. In our study, those disclosures identied by Engstrom (1988, pp. 133144), as discussed above, were used as our dened information set. One advantage of using the Engstrom (1988) list is that it is fairly comprehensive in its inclusion of disclosures and is derived from responses provided by the US users of higher education nancial reports. In addition, the mean importance ratings reported by Engstrom (1988) provide weights for each of the disclosure variables for a variety of constituent groups (see Engstrom, 1988, pp. 6893). By incorporating user-assigned weighted disclosures, our study attempts to incorporate the relative importance of dierent disclosures into the analysis. Although Robbins and Austin (1986, p. 420) found no material increase in explanatory power of a compound index over a simple index, conceptually, an
253
analysis that incorporates the importance of individual disclosures is superior to one that does not (Robbins and Austin, 1986, p. 420). Through the content analysis described above, the disclosures provided by the sample schools were identied, and weights applied. The sum of these weighted scores were divided by the total possible weighted score for that school to arrive at a Total Extent of Disclosure (EXTENT) score, which serves as the rst dependent variable in the study. It is based on all of the relevant items in Engstrom (1988). 26 The second dependent variable, Extent of SEA Disclosure (SEA), is calculated in the same way as EXTENT but includes only those Engstrom (1988) items designated as Enrollment Data (Tables 5 and 6 in Engstrom, 1988, p. 82) and Performance Measurement (Tables 57 in Engstrom, 1988, p. 84). Conceptually, EXTENT and SEA could range from 0% to 100%. A school that provided none of the Engstrom (1988) disclosures would receive 0%. A school that provided all possible disclosures would score 100% of the possible disclosures. Note that the total possible score diered from school to school because of dierent economic circumstances. For example, a school with no debt would be unable to provide disclosures concerning debt maturities, security provisions, etc. Including those disclosures in the denominator of a school without such economic circumstances would implicitly penalize those schools. Appendix A presents descriptive statistics for the EXTENT scores for all sample schools as well as the SEA disclosure scores which are a subset of EXTENT. 27 5.4. Statistical methods Ordinary least squares multiple regression models were used in our study to test the hypotheses detailed above, by category. Table 2 presents the model used to test the hypotheses related to the overall extent of disclosure scores (EXTENT) and provides tests for Hypotheses 15. Because debt covenants and other monitoring requirements are a function of the number of issues outstanding, as well as size of nancing relative to the nancing institutions size, there are several possible measures that could be used to test Hypothesis 5. We used a ratio of debt to equity (DEQUITY) measured as long-term debt divided by total fund balance. Hypothesis 6 is tested by examining EXTENT scores for
26 Of the 76 original Engstrom items (1988, pp. 133144), two concerned standard setting and were not pertinent to individual C&U reports. There was one duplicate item. Certain items were mutually exclusive, including three types of balance sheet formats and two items related to depreciation disclosures. Consequently, the maximum possible unweighted score that an institution could receive was 69. With Engstrom (1988) importance weights attached, the maximum possible weighted score was 233.04. 27 A list of the institutions included in the study can be obtained from the rst author. Also available is a list of the Engstrom (1988) items showing the frequencies as reported by the 100 public and private institutions included in our sample.
254
Table 2 Total extent of disclosure models (ordinary least-squares regression) Model 1 (public and private institutions) EXTENT a b1 LAGASSET b2 BRDMBRS b3 PUBLPRIV b4 BIG6 b5 DEQUITY e where a b LAGASSETS BRDMBRS PUBLPRIV BIG6 DEQUITY e Standard intercept Standard regression coecient natural log of gross assets adjusted for interfund receivables/ payables Number of members on governing board Public or private institution (1 public, 0 private) Big-6 or non-Big-6 auditor (1 Big-6 rm, 0 other) Long-term debt to total fund balance Standard normal, randomly distributed error term
the 49 public institutions using correlation and linear regression (similar to Model 4 in Table 3) with all public institutions governed by a state-wide consolidated governing board coded as 1 and all other institutions coded as 0.
Table 3 Extent of SEA disclosure models (ordinary least-squares regression) Model 2 (private institutions only) SEA a b1 TUITPCT b2 ENDOW b3 TUITION e Model 3 (public institutions only) SEA a b1 CONSBRD b2 STATEAUD e Model 4 (public and private institutions) SEA a b1 TUITPCT b2 ENDOW b3 TUITION b4 BIG6 b5 PUBLPRIV e where a b SEA TUITPCT ENDOW TUITION STATEAUD BIG6 CONSBRD PUBLPRIV e Standard intercept Standard regression coecient Extent of disclosure score for enrollment and performance measurement items only Tuition and fees expressed as a percentage of current fund revenues Natural log of fair value of endowment funds (including quasiendowments) (In-state) Tuition rate charged for a full-time undergraduate student State auditor or non-state auditor Big-6 or non-Big-6 auditor State-wide consolidated governing board (1 yes, 0 no) Public or private institution Standard normal, randomly distributed error term
255
Table 3 presents the models related to the extent of disclosure of SEA, which is a subset of the overall disclosure index. Model 2 relates to the private institutions only and is used to examine Hypotheses 79. Constructs used for the independent variables for these three hypotheses are TUITPCTtuition and fees expressed as a proportion of total current fund revenues, ENDOWthe fair market value of endowment and similar funds including quasi endowments, and TUITIONthe tuition rate for a full-time undergraduate student. Model 3 relates to the public institutions only and is used to examine Hypothesis 10 by recoding audit rm size (BIG6) to auditor type. For this new variable (STATEAUD), nancial reports audited by state auditors are scored 1 and those audited by any other type of auditor or unaudited are scored 0. Model 4 is basically a combination of Models 2 and 3 and is used to examine Hypothesis 11. The distinctions between public and private institutions are designated by PUBLPRIV, with public schools coded with a 1 and private schools coded with a 0. To examine the public versus private dimension for the overall sample, tuition dependence, tuition rate, endowment and type of auditor were included as control variables. The disclosure literature is far from conclusive on establishing a dominant theory on why rms disclose dierent amounts of information (evidenced by the predominantly low R2 s) (Malone et al., 1993, p. 266) and no previous studies of colleges and universities exist to guide model specication. Coecients for all variables in each model are reported. 28
6. Results The total extent of disclosure scores ranged from a high of 59.1% of the maximum possible score to a low of 17.6%. On average, each institution reported 19.7 disclosure items with a weighted EXTENT score of 30.5%. The highest extent of SEA disclosure score was 59.6% of the maximum possible score but 51 institutions provided none of the disclosures and received zero scores. On average, each institution reported 2.42 of the SEA items or 14.2% of the 17 possible disclosures (see Appendix A). There was no signicant dierence between public and private colleges and universities on either the weighted or unweighted scores. An examination of Appendix A reveals that there is
Stepwise procedures have also been used to examine extent of disclosure models (e.g., Malone et al., 1993, p. 265). This is a generally accepted procedure when there is not enough theory regarding the importance of candidate variables as explanatory variables Cohen (1991, p. 226). Using stepwise procedures with this data produced models that included only the signicant coecients. The adjusted R2 of the reduced models were not materially dierent than those reported here.
28
256
Table 4 Frequency distribution of auditors responsible for annual audit Private institutions Big-6 accounting rm Other CPA rm State auditor Unaudited report Total 49 1 0 1 51 Public institutions 28 0 17 4 49 Total 77 1 17 5 100
considerable room for improvement in meeting users expressed information needs. Table 4 shows the extent to which the annual reports we received were audited, with a breakdown between private and public institutions. The Big-6 prepared all but one of the 78 annual reports audited by CPA rms. Another 17 annual reports were audited by state auditors. The remaining ve reports we received did not include an auditors opinion letter. Descriptive statistics about the 100 institutions are presented in Table 5. The dierence in adjusted gross assets between public and private institutions was
Table 5 Selected characteristics of sample institutions Public institutions (n 49) Mean Panel A: data from nancial statements Gross assets (adjusted) Fund balance of endowment Current fund revenues Total tuition and fees Education and general expenditures (current funds) Long-term debt (all funds) Total liabilities (all funds) Total fund balance (all funds) Panel B: other data Debt equity ratio Annual tuition and fees per student Years since founding Total faculty Governing board size Enrollment (Fall term, 1993)
*
Private institutions (n 51) Mean Standard deviation $1,905,364 $1,104,954 $448,661 $103,965 $390,315 $227,692 $340,451 $1,438,513 25.14% $3857 59 421 13 6682
Standard deviation $2,561,255 $182,146 $1,447,924 $140,399 $955,567 $535,968 $808,255 $1,791,377 13.69% $1150 30 1285 9 33,101
(000 omitted) $1,655,826 $105,499 $890,683 $133,754 $669,181 $235,938 $380,298 $1,202,426 21.96% $2758 128 1618 15 40,258
$1,546,481 $684,025 $440,770 $129,429 $371,557 $186,820 $301,002 $1,050,113 44.93% $14,964 140 553 39 9861
Indicates that means are signicantly dierent at p < 0:05 (two-tail t-test).
257
not statistically signicant, although public institutions were signicantly larger in terms of enrollment, faculty, current fund revenues, and education and general expenditures. Private institutions endowments were signicantly larger than those at the public institutions and private schools charged signicantly higher tuition and fees. They also had more members serving on their governing boards. 29 There were no signicant dierences between public and private institutions with respect to long-term debt, total liabilities, or total fund balances. However, the average long-term debt to fund balance ratio (DEQUITY) was 44.9% for private institutions and 22.0% for public institutions (p < 0:001, two-tail test). 6.1. Total extent of disclosure models The ordinary least squares multiple regression procedures used to examine the hypotheses must be interpreted carefully due to a variety of problems created by correlated independent variables. With correlated independent variables, coecients and intercept terms can be unreliable (Ott, 1993, p. 591). In that circumstance, the regression coecient measures only the marginal or partial eect of the specic independent variable on the dependent variable. In order to address potential eects of multicollinearity, several methods recommended by Neter et al. (1989, pp. 408411) were used including examination of (a) Pearsons productmoment correlations of independent variables; (b) eigenvalues and variance ination factors; (c) changes in estimated regression coecients as variables were removed from the model using a backward elimination stepwise procedure; and (d) estimated coecients with incorrect signs. Table 6 shows correlations among the variables used in Model 1. The size variable, adjusted gross assets, was strongly skewed to the right and a log transformation (LAGASSET) was used to normalize the distribution and improve linearity. The relationship between LAGASSET and EXTENT of disclosure was signicant (r 0:37). Negative correlations between PUBLPRIV and BIG6 and between PUBLPRIV and BRDMBRS indicate public institutions (coded 1) are frequently audited by state auditors rather than accounting rms and have smaller governing boards as compared to private institutions (coded 0). The only apparently problematic correlation was between status as public or private with number of board members at )0.733.
We contacted all 100 institutions by telephone to obtain information on size of governing board. Only 59 institutions included a list of board members in their 19931994 annual reports. The information obtained by telephone was consistent with the annual report data when it was available.
29
258
Table 6 Pearson correlations of variables included in Model 1 EXTENT LAGASSET Natural log of adjusted gross assets BRDMBRS Number of members on governing board PUBLPRIV Public institution 1 Private institution 0 BIG6 Major accounting rm 1 Others 0 DEQUITY Long-term debt to total fund balance
*
LAGASSET
BRDMBRS
PUBLPRIV
BIG6
0.363
0.088
0.084
)0.078
0.151
)0.733
)0.039
0.056
0.415
)0.463
0.120
0.003
0.377
)0.495
0.186
Correlation is signicant at the 0.01 level (two-tailed).
Farrar and Glauber (1967, p. 98) and Judge et al. (1982, p. 620) suggested that simple correlations between independent variables should not be considered harmful until they exceeded 0.80 or 0.90. Simple correlations of 0.80 or 0.90 are usually associated with variance ination factors of between 6 and 10. Variance ination factors in excess of 10, as Neter et al. (1989, p. 409) point out, should be considered indications of harmful multicollinearity. Table 7 reports the results of the regression for Model 1. Including all ve of the hypothesized explanatory variables produced a modest but signicant adjusted R2 of 0.131. However, size was the only independent variable with a coecient signicantly dierent than zero. The variance ination factors and condition index indicated no major problem with multicollinearity. Thus it appears that reporting practices of colleges and universities are consistent with some ndings from the for-prot sector: larger institutions make more extensive disclosures than smaller institutions. However, for this sample, leverage and audit rm size eects were not evident. Likewise, our hypotheses with respect to the impact of board size and classication as public or private were not supported. To test Hypothesis 6, we looked at just the 49 public institutions. The average overall extent of disclosure score for institutions in states with a consolidated governing board for higher education had a lower level of disclosure than public institutions in other states (27.5% versus 32.0%). The dierence is signicant using both the weighted (p 0:057, two-tail t-test) and the
Table 7 Ordinary least-squares linear regression results for Model 1 R 0.419 ANOVA Regression Residual Total R2 0.175 Sum of squares 1037.790 4883.856 5921.647 Adjusted R2 0.131 df 5 94 99 Standard error of the estimate 7.2080454% Mean square 207.558 51.956 F 3.995 Signicance 0.002
Unstandardized coecients b Standard error
Standardized coecients b
Signicance
95% condence interval for b Lower bound )21.043 1.470 )0.175 )8.733 )6.645 )0.052 Upper bound 13.914 4.165 0.094 1.161 1.157 0.091
Collinearity statistics Tolerance VIF
Coecients (dependent variable EXTENT , overall extent of disclosure weighted index) (Constant) )3.564 8.803 )0.405 0.686 LAGASSET 2.818 0.679 0.416 4.152 0.000 BRDMBRS )4.074E)02 0.068 )0.087 )0.602 0.549 PUBLPRIV )3.786 2.492 )0.246 )1.519 0.132 BIG6YN )2.744 1.965 )0.150 )1.397 0.166 DEQUITY 1.918E)02 0.036 0.058 0.533 0.596
0.875 0.420 0.335 0.760 0.745
1.142 2.381 2.986 1.316 1.342
259
260
unweighted disclosure scores (26.5% with a consolidated governing board and 31.5% without, p 0:033, two-tail t-test). This nding was contrary to our expectations. 30 To further examine the relationship, we ran a ordinary least squares regression which included the type of auditor as a (dummy) control variable (equivalent to Model 3 in Table 3 but with EXTENT as the dependent variable). For this test, we coded STATEAUD 1 if the institutions nancial statements were audited by a state agency and STATEAUD 0 if unaudited or audited by a CPA rm. Adjusted R2 for the model was 0.078 with a signicance level of p 0:057 (two-tail test). The coecient for STATEAUD was positive but not signicantly dierent from zero. 31 The coecient for CONSBRD was negative and signicant (p 0:072, two-tail test). Both the negative correlation and coecient would seem to indicate that institutions in states with consolidated governing boards for higher education do not view their audited nancial statements as an important part of their reporting obligation. Perhaps other information prepared on a uniform basis by all institutions reduces the need for additional voluntary disclosures within the annual report. 6.2. Extent of SEA disclosure models Model 2 included only the 51 private institutions. Examination of the correlation matrix for the variables provided similar results to those shown in Table 8, which includes all 100 institutions. SEA was positively associated (r 0:549, p 0:000, two-tail test) with the annual tuition and fees charged to students by private schools (TUITION) and with ENDOW (r 0:491, p 0:001, two-tail test), the natural log of the fair value of the institutions endowment. The hypothesized negative relationship between SEA and TUITPCT was supported (r 0:441, p 0:001, two-tail test). There was a strong negative correlation between ENDOW and TUITPCT (r 0:734, p 0:000, two-tail test) that is a potential source of muftieollinearity for Model 2. The ordinary least squares regression results for Model 2 were signicant (p 0:000, two-tail test) with an adjusted R2 of 0.321. As predicted in the hypotheses, the coecient for TUITION was positive and signicant (t 3:480, p 0:0011, two-tail test), and the coecient for TUITPCT was negative and signicant (t 2:071, p 0:0438, two-tail test). The constant term and the size of the endowment terms were negative but not signicantly
30 With respect to the 17 SEA disclosures only, there was no dierence in means for either the weighted or unweighted disclosure index score. 31 As an alternative, we used BIG6 as the control variable for type of auditor. This model had a similar adjusted R2 (p 0:089, two-tail test) and the coecient for BIG6 was negative but not signicantly dierent from zero.
Table 8 Pearson correlations of variables included in Model 4 SEA TUITPCT Tuition and fees as percentage of current fund revenues ENDOW Natural log of fair value of all endowments TUITION Undergraduate annual tuition rate (in-state) BIG6 Major accounting firm 1 Others 0 STATEAUD State auditor 1 Others 0 CONSBRD Consolidated governing board 1 None or private 0 PUBLPRIV Public institution 1 Private institution 0
* **
TUITPCT
ENDOW
TUITION
BIG6
STATEAUD
CONSBRD T. Gordon et al. / Journal of Accounting and Public Policy 21 (2002) 235275
)0.230
0.183
0.059
0.176
0.498
0.533
)0.152
0.297
0.371
0.459
0.144
)0.326
)0.227
)0.439
)0.828
)0.041
)0.361
)0.504
)0.537
)0.322
0.195
)0.005
)0.652
)0.438
)0.907
)0.463
0.462
0.558
Correlation is signicant at the 0.05 level (two-tailed). Correlation is signicant at the 0.01 level (two-tailed).
261
262
dierent from zero. Despite the high correlation between ENDOW and TUITPCT, all of the variance ination factors were <10. 32 To test Hypothesis 10, we looked at only the 49 institutions classied as public. The type of auditor for public institutions is reported in Table 4. The SEA scores were 15.4% for the 17 institutions with state auditors and only 7.7% for the 28 institutions audited by Big-6 accounting rms. The four schools that sent unaudited nancial statements had an average not signicantly dierent from the mean of 10.6% for public institutions in our sample. Since there may be dierences in reporting practices related to the existence of a state-wide consolidated governing board for higher education, Model 3 included CONSBRD as a control variable (1 consolidated board, 0 no consolidated board). The independent variable STATEAUD carried a value of 1 if the institution was audited by the state auditor and a value of 0 if audited by a public accounting rm or unaudited. STATEAUD and SEA were positively correlated (r 0:26, p 0:074, two-tail test). Adjusted R2 for Model 3 was 0.028 (F 1:699, p 0:194, two-tail test) with a positive and signicant coecient for STATEAUD (p 0:083, two-tail test). Omitting CONSBRD from the model would have increased adjusted R2 to 0.046 (F 3:339, p 0:074, two-tail test). In other words, type of auditor explained very little of the difference in extent of disclosure. To test for dierences between public and private institutions SEA disclosures, the combined Model 4 controls for tuition, endowment, and tuition dependence (variables from Model 2) as well as auditor type. Table 8 shows the correlations among the variables included in Model 4. In contrast with the relationship that held for private institutions, a high tuition rate (TUITION) is positively associated with reliance on tuition and fees for operating revenues (TUITPCT) and the market value of the institutions endowment (ENDOW). The correlations also highlight certain systematic dierences between public and private institutions: public institutions have lower tuition rates (TUITION), are less reliant on tuition for operating revenues (TUITPCT), and have smaller endowments (ENDOW). Private institutions relied on tuition for 44.5% of current fund revenues as compared to 17.6% for public institutions. PUBLPRIV is strongly correlated with STATEAUD since only public institutions had state auditors.
32 The highest variance ination factor for this model was 3.8 but the condition index for the fourth dimension was 42 which is above the criteria recommended by Neter et al. (1989, p. 405). This means that multicollinearity may have inuenced the results (Belsley et al., 1980, p. 105). Multicollinearity does not aect the explanatory power of a model but it does make it dicult to assess the relative importance of independent variables (Belsley et al., 1980, p. 105). Therefore, it is possible that a dierent sample would produce a model in which ENDOW would be substituted for one of the other two variables.
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Table 9 shows the ordinary least squares regression results. The results are consistent with Models 2 and 3 showing only PUBLPRIV as an additional independent variable (although the variable representing auditor type is BIG6 rather than STATEAUD). The model is signicant (F 6:321, p < 0:000, twotail test). Tests for presence of multicollinearity were all satisfactory. As a group, the variables explained 21.2% of the entire variance in extent of disclosure of SEA and enrollment information. All independent variables other than ENDOW were signicant although signs were not always in the hypothesized direction. The results suggest that state auditors may be more willing than public accounting rms to be associated with SEA disclosures and that prestigious institutions with high tuition rates tend to provide more SEA disclosures. Institutions highly dependent on tuition and fees as a source of operating revenue tend to provide fewer SEA disclosures. An alternate way of looking at extent of disclosure would be to compare institutions which provided a corporate style annual report as compared to those that provided only a basic set of nancial statements. We dened as corporate style any annual report that included photos, graphics, or a management discussion and analysis. Table 10 presents some statistics associated with this dichotomy. The primarily voluntary disclosures rated by the respondents to the Engstrom (1988) study are more likely to be found in corporate style annual reports as indicated by the signicant dierence in means (p 0:001, two-tail t-test). This is particularly true for the SEA indicators. 33 In addition to the mean disclosure index scores, Table 10 displays the frequencies associated with several signicant causal factors. 34 Reports audited by Big-6 rms were distributed about equally across the two styles but other auditors and unaudited report were associated with the corporate style far more often than with the basic report style. Research institutions tended to use the corporate style while doctoral and comprehensive institutions reported using the basic report style. Public institutions tended to employ the corporate style for nancial reporting while private institutions used the basic report format. 6.3. Summary of hypotheses To test the 11 hypotheses established earlier, the proposed models for extent of disclosure by public and private colleges and universities were examined for
33
Thanks to an anonymous reviewer who suggested this alternate approach to looking at our results. 34 Thanks to an anonymous reviewer, we collected data by a telephone call to the institution about the CFOs credentials of all the institutions in the sample. Most CFOs were also CPAs (73%) and many had advanced degrees. However, contrary to expectation, we found no signicant relationship between credentials or education and extent of disclosure.
264
Table 9 Ordinary least squares linear regression results for Model 4 R 0.502(a) ANOVA Regression Residual Total R2 0.252 Sum of squares 5396.816 16052.302 21449.117 Adjusted R2 0.212 df 5 94 99 Standard error of the estimate 13.0678678 Mean square 1079.363 170.769 F 6.321 Signicance 0.000(a)
Unsaturated coecients b Standard error
Standardized coecients b
Signicance
95% condence interval for b Lower bound Upper bound only) 17.791 0.004 1.549 0.003 )1.708 29.449
Collinearity statistics Tolerance VIF
Coecients (dependent variable SEA, extent of disclosure score for enrollment and performance items (Constant) )4.521 11.237 )0.402 0.688 )26.833 TUITPCT )0.176 0.091 )0.248 )1.939 0.055 )0.355 ENDOW 0.355 0.601 0.066 0.591 0.556 )0.838 TUITION 1.816E)03 0.001 0.834 3.610 0.000 0.001 BIG6 )8.848 3.596 )0.254 )2.460 0.016 )15.989 PUBLPRIV 14.678 7.439 0.501 1.973 0.051 )0.092
0.488 0.632 0.149 0.746 0.123
1.142 1.582 6.712 1.341 8.099
T. Gordon et al. / Journal of Accounting and Public Policy 21 (2002) 235275 Table 10 Disclosure as a function of annual report style with causal factors Mean Corporate style (n 57) Total disclosure index SEA disclosure index 33.5 18.2 Cross-tabulations Corporate style (Frequency) Reports audited by Big-6 accounting rms Other auditors and unaudited reports v2 5:509, signicance (two-sided) 0:029 Research I and II institutions Doctoral and Comprehensive institutions v2 11:616, signicance (two-sided) 0:001 Public institutions Private institutions v2 4:197, signicance (two-sided) 0:046 39 18 57 43 14 57 33 24 57 Basic report (Frequency) 38 5 43 18 25 43 16 27 43 Basic report (n 43) 26.4 0.6
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signicance. As discussed before, the regression models explained only a small portion of the variance in level of disclosure. For all models, the observed sign and signicance of the t-statistic for the regression coecients were examined to determine whether the research hypothesis associated with each variable was supported. The following is a summary of the conclusions: Ha1: (Supported) Colleges and universities with higher levels of gross assets disclose nancial information to a greater extent than their smaller counterparts (Table 7). Ha2: (Not supported) Colleges and universities with more members on the governing board did not disclose more information than institutions with fewer members. Ha3: (Not supported) Public institutions disclosures were less extensive than those of private institutions (Table 7) when institutional size was also taken into consideration. However, public institutions were signicantly more likely to provide a corporate style report (Table 10). Ha4: (Not supported) Annual reports audited by major accounting rms were associated with a lower overall level of disclosure but the dierence was not statistically signicant (Table 7). Ha5: (Not supported) Leverage as measured by a debt to equity ratio was not associated with a higher level of disclosure (Table 7).
266
Ha6: (Not supported) The presence of a state-wide consolidated governing board for public colleges and universities was actually associated with a lower level of disclosure. Ha7: (Supported) Private colleges and universities whose operations are proportionally more reliant on tuition and fees disclosed signicantly less SEA information than institutions less reliant on tuition and fees (Table 9). This was particularly true for private institutions (Model 2). Ha8: (Not supported) Private institutions with large endowments reported more information about SEA. However, private colleges and universities with large endowments were less dependent on tuition and had higher tuition rates than private institutions with smaller endowments. The direct relationship between SEA disclosures and endowment was not supported when these variables were included in the regression for Model 2. Ha9: (Supported) Private colleges and universities with higher tuition fees disclosed SEA information to a greater extent than institutions with lower tuition fees. Ha10: (Supported) Public colleges and universities audited by state auditors disclosed information about SEA to a greater extent than did those audited by public accounting rms. For the full sample, a lower level of SEA disclosure was associated with annual reports audited by the major accounting rms (Table 9). Ha11: (Supported) Public institutions disclosed SEA information to a greater extent than private institutions once the eect of tuition dependence, tuition rate, and audit rm were controlled (Table 9).
7. Implications and conclusions An examination of variables for their relationship with total extent of disclosure and extent of service eorts and accomplishment disclosure was employed to determine whether systematic dierences exist among colleges and universities. The overall conclusion of this study is that there are some systematic dierences among colleges and universities that are associated with dierent amounts of information provided in their annual nancial reports. These dierences lend some justication to the FASB approach in SFAS Nos. 116 and 117 (FASB, 1993a,b). However, the overall low level of reporting brings to question the GASBs decision to prohibit public colleges and universities from adopting the FASB reporting model (GASB, 1995). The new reporting model issued by GASB (1999a) for state and local governments and extended to colleges and universities by GASB (1999b) Statement No. 35 narrows the divergence but signicant dierences continue to exist due to dissimilar denitions, classications and display criteria.
267
Our study found total gross assets (total assets plus accumulated depreciation) is signicant in explaining total extent of disclosure (see Table 7). Prior studies (e.g., Cerf, 1961, p. 110; Buzby, 1975, p. 30; Chow and Wong-Boren, 1987, p. 540) found entity size to be associated with extent of nancial disclosures. This study supports those ndings. Larger higher education institutions disclose more data. The larger entities may be responding to higher accountability expectations and political visibility. Moreover, bigger institutions due to economies of scale can disclose data more cost eectively. Our study also found three variables (tuition rate, tuition revenue as a proportion of current revenues, and auditor type) were statistically signicant in explaining the extent of SEA disclosure (see Table 9). The tuition variables focus on the teaching function. Private institutions with higher tuition fees may disclose more information as a promotional exercise to better compete against rival private schools. Table 10 examined causal factors of reporting styles. The evidence showed signicant dierences between the corporate style versus the basic report for both SEA and total disclosures. A large, public, state audited institution was more likely to generate an extensive corporate style report. These entities may be focused on the promotional benets or may be striving to meet greater accountability expectations. As expected, public institutions beholden to taxpayers as well as other constituent groups, provided more SEA disclosures than their private counterparts. This trend is consistent with accountability tenets. State auditors inuenced higher levels of SEA disclosures. This factor is also occurring overseas. For instance, in Australia, state auditor generals are requiring extensive performance indicator disclosures (Coy et al., 1994). Again a higher level of accountability expectations seems to be driving accounting disclosures. Our study results do not support several other hypotheses. For instance, the type of governance and level of leverage were not predictors of disclosures. In both cases it may be that the proxy variables are not suciently accurate measures. Governance was measured by size of board, however, one or two powerful leaders could radically change disclosure expectations. Leverage, as measured by debt to equity ratio does not in itself explain the closeness to any debt covenant constraints and in general the level of overall debt was relatively low. The responsiveness of an institution to the demands placed on it for accountability is indicated by the type and quality of information it provides to its stakeholders (Coy et al., 2001). Financial statement users assessments, if based on limited information, may not be helpful or accurate. The information used by administrators to allocate resources to programs and to assess the eectiveness of those services is the same type of information that would be useful to other constituents (i.e., students, alumni, parents, bondholders, accreditation bodies, taxpayers and others). Various ratios and other analyses have been developed to assess the degree of nancial success (for example, see
268
Dickmeyer and Hughes, 1980; Salluzzo and Prager, 1999). SEA, however, must be based on a host of non-nancial indicators that attempt to measure the economy, eciency, and eectiveness of the institution. While the public may have the right to know, the annual reports analyzed for our study showed considerable room for improvement. In particular, the lack of enrollment information means that nancial statement users would be unable to compute a variety of commonly recommended ratios used in analyzing nancial condition such as acceptance rate, expenditures per student, and tenured faculty ratio. In New Zealand, the periodic reporting of a qualitative disclosure index has been found to improve the external reporting practices of public universities (Coy and Dixon, 1996, p. 37) and studies like ours could provide a nucleus for a similar trend of improvement in the US. Our study was unique in that the content analysis procedure for each institution in the population was scored by two individuals, with a reconciliation performed in each case. Most of the discrepancies found in the reconciliation were errors of omission and were easily resolved. A search of the extent of disclosure literature found no other double scored content analysis in the extent of disclosure literature. Several limitations to the study must be addressed. First, the identication of surrogate college and university variables to adequately measure nancial attributes may be a limitation. In particular, size is commonly measured by sales and market capitalization variables (Foster, 1986, p. 111), neither of which is relevant to colleges and universities. While enrollment and current fund revenues might have been used an independent variables, we used the log of adjusted gross assets. Our results showed a clear size eect, consistent with past literature (e.g., Cerf, 1961, p. 110; Singhvi and Desai, 1971, p. 137). Second, the extent of SEA disclosure measure made no attempt to evaluate the quality of disclosure. A single sentence description of faculty accomplishments received the same score as a detailed report of several pages. The subjective nature of a quality-based ranking preclude this approach. Moreover, even with this caveat, it is safe to say that most institutions are not using their annual reports as a vehicle to tout their student and faculty accomplishments. A third limitation to our study is the possible problem associated with correlated variables. The use of highly correlated variables that perhaps measure the same attribute, such as tuition charged and the type of institution, could be a limitation although the variance ination factors did not exceed the level suggested by Neter et al. (1989, p. 409). The fourth and principal limitation to our study is the composition of the population. Because public and private institutions have such diverse missions, our study used accredited engineering programs for its common base, which necessitated a restriction in the population. Not all states have private four-year institutions. Of those states that do have private four-year institutions, some states do not have four-year institutions that have accredited engineering pro-
269
grams. This restriction limits the ability to extend the results of our study nationally to all higher education institutions in the US, particularly the smaller, systematically dierent types of colleges and universities. International extensions would be even more tenuous given the very dierent ways the delivery of higher education is organized elsewhere (see Geiger, 1986, 1988). Despite these limitations our study provides important insights on determinants of disclosure. Examination of extent of disclosure through a positive theory lens has the potential to provide regulators with an increased understanding of what motivates entities to provide information as part of the nancial reporting process. Our study adds to the body of knowledge because it examines a dierent reporting environment, higher education. This setting is particularly interesting because it is regulated by two dierent private sector standard setting boards. Like most other extent of disclosure studies (e.g., Cerf, 1961; Copeland and Fredericks, 1968; Buzby, 1974, 1975; Choi, 1973), this analysis of college and university nancial reporting is cross-sectional in nature. Future study of the impact of implementation of SFAS 117 by private colleges and universities is recommended. Such studies will provide interesting insights into perceptions of reporting quality after adoption. Acknowledgements The authors wish to thank Dr. John H. Engstrom (Northern Illinois University), Dr. David Coy (University of Waikato, New Zealand), and Dr. Marla Myers Kraut (University of Idaho) for their valuable comments and assistance. We also appreciate the comments of the anonymous reviewers. Appendix A Descriptive statistics for institutioins included in study with overall (EXTENT) and SEA disclosure index scores
270
Descriptives and percentiles Descriptives and percentiles Extent of disclosure scoreOverall Mean 95% condence interval Lower bound for mean Upper bound 5% trimmed mean Median Variance Standard deviation Minimum Maximum Range Interquartile range Skewness Kurtosis Extent of disclosure scoreSEA only Mean 95% condence interval Lower bound for mean Upper bound 5% trimmed mean Median Variance Standard deviation Minimum Maximum Range Interquartile range Skewness Kurtosis Statistic 30.5412015% 29.0066099% 32.0757931% 30.0257657% 29.0787500% 59.815 7.7339908% 17.59436% 59.05430% 41.45994% 9.3179525% 1.091 1.346 10.6713799% 7.7507517% 13.5920081% 9.0976718% 0.0000000% 216.658 14.7192986% 0.00000% 59.57411% 59.57411% 18.5689900% 1.388 1.218 Standard error 0.7733991%
0.241 0.478 1.4719299%
0.241 0.478
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Journal of Accounting and Public Policy 21 (2002) 235275 www.elsevier.

T. Gordon et al. / Journal of Accounting and Public Policy 21 (2002) 235275

T. Gordon et al. / Journal of Accounting and Public Policy 21 (2002) 235275

T. Gordon et al. / Journal of Accounting and Public Policy 21 (2002) 235275

T. Gordon et al. / Journal of Accounting and Public Policy 21 (2002) 235275

T. Gordon et al. / Journal of Accounting and Public Policy 21 (2002) 235275

T. Gordon et al. / Journal of Accounting and Public Policy 21 (2002) 235275

T. Gordon et al. / Journal of Accounting and Public Policy 21 (2002) 235275

T. Gordon et al. / Journal of Accounting and Public Policy 21 (2002) 235275

T. Gordon et al. / Journal of Accounting and Public Policy 21 (2002) 235275

T. Gordon et al. / Journal of Accounting and Public Policy 21 (2002) 235275

T. Gordon et al. / Journal of Accounting and Public Policy 21 (2002) 235275

T. Gordon et al. / Journal of Accounting and Public Policy 21 (2002) 235275

T. Gordon et al. / Journal of Accounting and Public Policy 21 (2002) 235275

T. Gordon et al. / Journal of Accounting and Public Policy 21 (2002) 235275

T. Gordon et al. / Journal of Accounting and Public Policy 21 (2002) 235275

Percentage 75.8 24.2 100.0 49.0 51.0 100.0 80.0

1,479,105 471,965 1,951,070 49 51 100 80

T. Gordon et al. / Journal of Accounting and Public Policy 21 (2002) 235275

T. Gordon et al. / Journal of Accounting and Public Policy 21 (2002) 235275

T. Gordon et al. / Journal of Accounting and Public Policy 21 (2002) 235275

T. Gordon et al. / Journal of Accounting and Public Policy 21 (2002) 235275

T. Gordon et al. / Journal of Accounting and Public Policy 21 (2002) 235275

T. Gordon et al. / Journal of Accounting and Public Policy 21 (2002) 235275

T. Gordon et al. / Journal of Accounting and Public Policy 21 (2002) 235275

T. Gordon et al. / Journal of Accounting and Public Policy 21 (2002) 235275

Correlation is signicant at the 0.01 level (two-tailed).

T. Gordon et al. / Journal of Accounting and Public Policy 21 (2002) 235275

Unstandardized coecients b Standard error

Collinearity statistics Tolerance VIF

0.875 0.420 0.335 0.760 0.745

1.142 2.381 2.986 1.316 1.342

T. Gordon et al. / Journal of Accounting and Public Policy 21 (2002) 235275

T. Gordon et al. / Journal of Accounting and Public Policy 21 (2002) 235275

T. Gordon et al. / Journal of Accounting and Public Policy 21 (2002) 235275

T. Gordon et al. / Journal of Accounting and Public Policy 21 (2002) 235275

Unsaturated coecients b Standard error

Collinearity statistics Tolerance VIF

0.488 0.632 0.149 0.746 0.123

1.142 1.582 6.712 1.341 8.099

T. Gordon et al. / Journal of Accounting and Public Policy 21 (2002) 235275

T. Gordon et al. / Journal of Accounting and Public Policy 21 (2002) 235275

T. Gordon et al. / Journal of Accounting and Public Policy 21 (2002) 235275

T. Gordon et al. / Journal of Accounting and Public Policy 21 (2002) 235275

T. Gordon et al. / Journal of Accounting and Public Policy 21 (2002) 235275

0.241 0.478 1.4719299%

T. Gordon et al. / Journal of Accounting and Public Policy 21 (2002) 235275

T. Gordon et al. / Journal of Accounting and Public Policy 21 (2002) 235275

T. Gordon et al. / Journal of Accounting and Public Policy 21 (2002) 235275

T. Gordon et al. / Journal of Accounting and Public Policy 21 (2002) 235275

T. Gordon et al. / Journal of Accounting and Public Policy 21 (2002) 235275

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