CRITICAL ANALYSIS: STRATEGIC DEVIATION ASSIGNMENT 1
Critical Analysis: Strategic Deviation
Assignment
James “Jim” Pressley
School of Business, Liberty University
Narrative Analysis
This paper is a critical narrative analysis of a Habib et al. (2024) Business strategy and
strategic deviation in accounting, finance, and corporate governance: A review of the empirical
literature. Accounting & Finance., 64(1), 129–159. This doctoral-level analysis will demonstrate
a deeper understanding and draw on the knowledge acquired from multiple sources, including,
CRITICAL ANALYSIS: STRATEGIC DEVIATION ASSIGNMENT 2
but not limited to, Paul and Elder’s Pathway for Critical Thinking and adopting the terminology
of Bloom’s Taxonomy.
The purpose of the research by Habib et al. (2024) was to critically evaluate the
consequences of strategic deviations from standards based on a synthesis of evidence in
industry literature. Habib et al. (2024) theorized that “businesses often lack a consolidated
understanding of how strategic deviations from industry standards impact a firm's performance
across key areas, including accounting, finance, and corporate governance.”
Synthesizing existing industry literature, Habib et al. (2024) sought to determine how
“strategic deviation from industry standards affects firms' performance across key areas,
including accounting, finance, and corporate governance.” Habib et al. (2024) relied on agency
theory and information asymmetry theory studies to explain how the “accounting and finance
domain business strategies of the firms can cause variations in financial disclosures, auditing,
and other capital market outcomes.”
Habib et al. (2024) chose a quantiave study analysis to determine the “ratio of research
and development to sales, the ratio of employees to sales, and the growth measure (1-year
percentage change in total sales), marketing (SG&A) to sales, and capital intensity (net PPE
scaled by total assets)”. No qualitative, mixed methods, or case studies were included. The
author identifies that arbitrarily assigning firms into different strategy types based on Bentley et
al.'s (2013) strategy may cause one to examine the validity and reliability of the strategy
measurements.
Habib et al. (2024) used a population sample including “45 published papers ranked B
and above from the 2019 Australian Business Deans Council (ABDC)” to improve the precision
of their data. Habib et al. (2024) used studies that “examine the determinants of strategy,
strategic uniqueness, and strategic change, which were excluded because they are primarily
conducted within the management discipline.” Habib et al. (2024) used six variables calculated
CRITICAL ANALYSIS: STRATEGIC DEVIATION ASSIGNMENT 3
using rolling average values over a 5-year period. A company could receive a maximum score of
thirty and a minimum score of six.
The main limitations of the study by Habib et al. (2024) are that strategic deviation is a
relatively new research agenda in the field of accounting. Limiting studies to those that use a
specific quantified typology lacked fairness and excluded qualitative methods, such as
interviews, surveys, and case studies.
One significant influencer of strategic deviation from industry norms is the CEO
compensation structure. The total compensation of the CEO is often tied to decisions that
would cause one to make radical changes in hopes that it would significantly increase pay,
especially in the short term. Carpenter (2000) found that “board expectations with realized
higher pay can serve to motivate a CEO to take actions which deviate the firm from its status
quo.” Baramzadeh et al. (2025) found that “Firms with higher deviations from industry norms
(DIN) are more likely to restate financial statements.” Deviating from industry norms can make
it challenging to track anomalous discretionary spending on activities such as marketing,
research and development (R&D), and increased production costs. Christensen et al. (2023)
found “it is difficult to distinguish strategic changes from real earnings manipulation (REM).”
Christensen et al. (2023) developed the Principal Components Analysis (PCA) approach, which
includes REM indicators, analyzes litigation risk, and contextual signals of prior accrual
manipulation, and “identifies patterns where multiple income-increasing activities coincide,
which is more indicative of manipulation.”
Future areas of consideration for researchers include qualitative insights into
decisionmaking for strategic deviation. The Principal Components Analysis (PCA) approach was
explored by Christensen et al. (2023). Many companies are including independent directors
with military backgrounds (IMDs) on boards. Cai et al. (2021) found IMDs characteristics such as
integrity and ethics predict that IMDs “impose greater scrutiny over the financial reporting
process ” For firms that seek to DIN, they should consider Cai et al.’s (2021) study of IMDs effect
CRITICAL ANALYSIS: STRATEGIC DEVIATION ASSIGNMENT 4
on key firm outcomes, “including CEO compensation, stock price performance, dividend policy,
10K report transparency, and the likelihood of financial or ethical misconduct.”
CRITICAL ANALYSIS: STRATEGIC DEVIATION ASSIGNMENT 5
References
Baramzadeh, E., Vaez, S. A., & Rekabdar, G. (2025). Deviation from industry norms, financial
restatements, and audit opinion. Iranian Journal of Accounting, Auditing & Finance
(Online), 9(2), 77–92. https://doi.org/10.22067/ijaaf.2025.44116.1367
Cai, C., Hasan, I., Shen, Y., Wang, S., Cai, C., Hasan, I., Shen, Y., & Wang, S. (2021). Military
directors, governance, and firm behavior. Advances in Accounting., 55,
100563. https://doi.org/10.1016/j.adiac.2021.100563
Carpenter, M. A. (2000). The price of change: The role of CEO compensation in strategic
variation and deviation from industry strategy norms. Journal of Management, 26(6),
1179–1198. https://doi.org/10.1177/014920630002600606
Christensen, T. E., Huffman, A., Lewis Western, M. F., & Valentine, K. (2023). A simple ‐
approach to better distinguish real earnings manipulation from strategy changes.
Contemporary Accounting Research, 40(1), 406–
450. https://doi.org/10.1111/1911-3846.12830
Habib, A., Ranasinghe, D., Perera, A., Habib, A., Ranasinghe, D., & Perera, A. (2024). Business
strategy and strategic deviation in accounting, finance, and corporate governance: A
review of the empirical literature. Accounting & Finance., 64(1), 129–
159. https://doi.org/10.1111/acfi.13131
Paul, R. & Elder, L. (2006). The miniature guide to critical thinking concepts and tools.
Retrieved (2025, July 18).
from https://www.criticalthinking.org/files/Concepts_Tools.pdf
Robson, C. (2024). Real World Research (5th ed.). Wiley. Kindle Edition.
https://read.amazon.com/?asin=B0D129XQLB&ref_=kwl_kr_iv_rec_1
Appendices
Appendix A.
CRITICAL ANALYSIS: STRATEGIC DEVIATION TEMPLATE
CRITICAL ANALYSIS: STRATEGIC DEVIATION ASSIGNMENT 6
Research problem. One sentence.
Businesses often lack a consolidated understanding of how strategic deviations from
industry standards impact a firm's performance across key areas, including accounting,
finance, and corporate governance.
Purpose statement. One sentence.
The purpose of this study was to critically evaluate the consequences of strategic
deviations from standards based on evidence in industry literature.
Overarching research question and/or hypothesis. One-two sentences.
Synthesizing existing industry literature to determine how strategic deviation from
industry standards affects firms' performance across key areas, including accounting,
finance, and corporate governance.
Population/sample. Two sentences
In total, 45 published papers ranked B and above from the 2019 Australian Business
Deans Council (ABDC). Studies that examine the determinants of strategy, strategic
uniqueness, and strategic changes were excluded because they are primarily conducted
within the management discipline.
Leading theory through which the problem and results are framed and interpreted.
Provide lead descriptor and its main premise. One-two sentences.
Agency theory and information asymmetry theory studies were relied on to explain how
the accounting and finance domain business strategies of the firms can cause variations
in financial disclosures, auditing, and other capital market outcomes.
Research approach/design/method, e.g., quantitative/correlational/survey
methodology for a multiple regression analysis; qualitative case study utilizing semi-
structured openended interviews, archival data, and observation; mixed methods
utilizing a quantitative survey data and case study semi-structured interviews for deep
contextual data. (20-50 words).
The studies used quantitative analysis to determine the ratio of research and
development to sales, the ratio of employees to sales, and the growth measure (1-year
percentage change in total sales), marketing (SG&A) to sales, and capital intensity (net
PPE scaled by total assets). To assign firms to different strategic types, Bentley et al.
(2013) compute a discrete STRATEGY composite measure using COMPUSTAT data. No
qualitative, mixed methods or case study were included. The author identifies arbitrarily
Constructs –provide lead descriptor. Variables, if any. For each variable, identify the type
i.e., dependent, independent, mediating, or moderating. (20-50 words).
There are six variables calculated using rolling average values over 5 years. A company
could receive a maximum score of thirty and a minimum score of six.
CRITICAL ANALYSIS: STRATEGIC DEVIATION ASSIGNMENT 7
Main limitations and assumptions (Two to three sentences).
Strategy deviation is a relatively new research agenda in the field of accounting. Limiting
studies to those that use a specific quantified typology lacked fairness and excluded
qualitative methods, such as interviews, surveys, and case studies.
Recommend follow up research or related problem to expand on or close gaps in
knowledge in the broad topic area.
1. Board dynamics
2. Qualitative insights into decision making for strategic deviation
3. Principal Components Analysis (PCA) approach
Cite at least two supporting peer reviewed research articles – single sentence. Cite at
least one peer reviewed journal article that presents an alternative view – single
sentence. (Three supporting scholarly articles in total)
1. Baramzadeh et al. (2025), “Firms with higher deviations from industry norms DIN
are more likely to restate financial statements.”
2. Christensen et al. (2023), “it is difficult to distinguish strategic changes from
earnings manipulation.”
3. Carpenter, (2000) “board expectations with realized higher pay can serve to
motivate a CEO to take actions which deviate the firm from its status quo.”
4. Cai et al. (2021) independent directors with military backgrounds (IMDs) on the
board influence key firm outcomes, including CEO compensation, stock price
performance, dividend policy, 10K report transparency, and the likelihood of
financial or ethical misconduct “Characteristics such as integrity and ethics
predict that military directors should impose greater scrutiny over the financial
reporting process and have lower tolerance for opportunistic manipulation of
corporate disclosures, as they hold a high moral standard and are trained to
follow the rules”. “IMDs strengthens the monitoring effectiveness of boards, as
we find that firms with IMDs have lower CEO compensation, greater forced CEO
turnover–performance sensitivity, and less earnings management”.
Powered by TCPDF (www.tcpdf.org)
