Beyond Profits: The Rise of Dual-Purpose Organizations and Its Consequences for Disclosure

By Anil Arya, Brian Mittendorf, Ram Ramanan
The Accounting Review | January 2019

DOI

doi.org/10.2308/accr-52166

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Citation

Arya, Anil., Mittendorf, Brian., Ramanan, Ram. Beyond Profits: The Rise of Dual-Purpose Organizations and Its Consequences for Disclosure The Accounting Review doi.org/10.2308/accr-52166.

The Accounting Review, 2019

Abstract

Organizations with a mission that extends “beyond profit” to achieve broader objectives are becoming increasingly common. This paper studies such hybrid entities—firms that value the profits they generate, as well as the utility they provide to customers—and details their implications for industry disclosure practices. The findings demonstrate that disclosure incentives are perturbed not just from being a hybrid entity, but also from competing with such entities. Accounting for both competitive and disclosure effects, the paper then assesses the circumstances under which a hybrid firm is economically viable and derives the ensuing equilibrium industry composition. As such, we show that the presence of firms with objectives beyond profit can be an endogenous characteristic of many industries.

Ram Ramanan is an Associate Professor of Accounting at the Indian School of Business (ISB). Before joining ISB, he served as a faculty member at the University of California, Davis and at SUNY, Binghamton.

Professor Ramanan’s research focuses on the role of accounting in management decisions. Specifically, he examines the incentive effects of financial reports and disclosures on various managerial decisions both inside an organisation and within supply chains. His work has been published in leading academic journals, including The Accounting Review, Journal of Accounting and Economics, The Review of Accounting Studies, Contemporary Accounting Research, Management Science, and Production and Operations Management.

At ISB Professor Ramanan teaches the core Managerial Accounting course and the elective in Strategic Performance Management.

Professor Ramanan holds a PhD in Accounting from the Kellogg School of Management, Northwestern University, and an MBA from the Indian Institute of Management, Bangalore. He is also a Chartered Accountant.

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