Joshua Ronen

In his research about the social costs and benefits of transfer pricing, Ronen points out a strong similarity between the problems of dealing with externalities and the intra-firm transfer pricing problem. A solution suggested in his earlier research is applied to the social cost problem. Ronen's research concludes that the information requirements for the administration of such a policy are identical to those arising in the transfer pricing case. Information about the marginal loss and marginal gain resulting from the activities should be obtained and communicated. In particular, low-cost information that firms can produce and communicate consists of the cost to a firm caused by a harmful side activity of another firm and the cost to a firm that can result from either eliminating or reducing the damage inflicted on others by its harmful activity. According to Ronen, this communication should preferably proceed on a systematic basis since changing factors in the environment may affect the loss and the gain curve.[6]

In his article titled 'Capacity and Operating Variances: An Ex Post Approach' in 1970, Ronen designed capacity variances to aid in improving decisions about the capacity design and utilization. He investigated the estimation of variances due to deviations between earlier and back point estimates of the relevant cost and demand parameters. An alternative method of generating variances differentiates the capacity and operating decisions based on the decentralization of these decisions. Due to this distinction, one can use variances effectively to decide on optimal capacity. Source of the variance determines if it is an excess of cost over revenue, total revenue, total cost, or contribution margin.[7]

In his research paper 'Classificatory Smoothing and Alternative Income Models,' Ronen focused on the role of extraordinary items in the management of income. Smoothing, in this context, is defined as suppressing fluctuations of a part of income that investors consider to be normal for the company. Ronen considers the purpose of smoothing to be the continuity of ordinary income (before extraordinary items) per share. His study detected smoothing behavior by observing the association between income deviations before extraordinary items from their first differences, and extraordinary item deviations from a constant trend or a macro index trend. Two main kinds of smoothing were distinguished, i.e., classificatory smoothing and Non-classificatory smoothing. The study concluded that firms' management classifies potentially extraordinary items to suppress the deviations of ordinary income before extraordinary items.[8]

Ronen published a research article about The Rise and Decay of Entrepreneurship in 1989. He discussed the entrepreneurial process and stated that a potential entrepreneur inclined novel ventures in the face of uncertainty. The entrepreneur works on capping the downside risk, such as to preserve his survival as an entrepreneur while expecting a large return. Ronen discussed the Prospect theory and the impact of transforming realities. He proposed a model of the entrepreneurial process which focuses on the circumstances affecting entrepreneurial supply rather than on the characteristics of individual entrepreneurs.[9]

In 2002, Ronen proposed Policy reforms in the aftermath of accounting scandals. He suggested that the danger of legal liability is not sufficient to diminish the motivation of auditors to do management bidding. The auditors recover the expected cost of lawsuits and other sanctions from the auditees. Such recovery leads to inefficiency in the allocation of risk and resources. Under Ronen's proposal, Companies portray themselves as having higher-quality financial statements by announcing higher limits of insurance coverage and smaller premiums and vice versa. This Financial Statement Insurance (FSI) scheme effectively removes the conflict of interest that became strongly evident in the aftermath of Enron. GAAP and GAAS reforms can reinforce this solution, which can lead to additional indirect benefits.[10]

• The Objectives of Financial Statements (1973)
• Corporate Financial Information for Government Decision Making (1975)
• Relevant Financial Statements (1978)
• Accounting, A Management Approach, Sixth Edition (1979)
• Smoothing Income Numbers: Objectives, Means, and Implications (1981)
• Off-Balance Sheet Activities (1990)
• Accounting and Financial Globalization (1991)
• Earnings Management: Emerging Insights in Theory, Practice, and Research (2008)
• Accounting and Regulation: New Insights on Governance, Markets, and Institutions" (2013)

• "Classificatory Smoothing of Income with Extraordinary Items," (co-authored with A. Barnea and S. Sadan), The Accounting Review, January 1976
• "To Fair Value or Not to Fair Value: A Broader Perspective," Abacus, Vol. 44, No.2, 2008, pp. 181–208.
• "Transfer Pricing for Divisional Autonomy," (co-authored with G. McKinney, III), Journal of Accounting Research, Spring 1970
• "An Expectancy Theory Approach to the Motivational Impacts of Budgets," (co-authored with J.L. Livingston), The Accounting Review, October 1975.
• "Some Hypotheses on the Pattern of Management's Informal Disclosures," (co-authored with V. Pastena), Journal of Accounting Research, Autumn 1979.
• "Incentives for Voluntary Disclosure," (co-authored with Varda Yaari), Journal of Financial Markets, 4 (4), 2001, pp. 309–357
• "Some Insights into the Entrepreneurial Process," in Entrepreneurship, ed. Joshua Ronen, Lexington: Lexington Books, 1983.
• "An Approach to Transfer Pricing Under Uncertainty," (co-authored with K. Balachandran), Journal of Accounting Research, Autumn 1988.*

"Legal Liabilities and the Market for Auditing Services," (co-authored with Julie Nelson and Lawrence White), Journal of Accounting, Auditing, and Finance, Vol. 3, No. 3, Summer 1988

• "Effects of Some Probability Displays on Choices," Organizational Behavior and Human Performance, November 1972