Why JB Hi-Fi?

| | |Classical Political Economy Theory can be effectively used to explain the decision of JB Hi-Fi to | |release its profit downgrade through expounding on crucial attributes presented by the theory. In the article, ASX made inquiries as to why JB Hi-Fi made the| |inclusion of its downgrade in the slides presented to the investment conference as opposed to a | |stand-alone “market sensitive” initiative (Wilson, 2014).

ACCT20074 Final Assignment
Term 1, 2018
Student ID:………………………………. Student name……………………………………………………..
Marker’s overall comments: The markers may include any
final comments here.
Overall Mark (Total) out of 50:
0

Question 1: Use Classical Political Economy Theory to explain JB Hi-Fi’s decision to release its profit downgrade
in the way it did. Make sure you explain what Institutional Theory is, and support your observations with evidence
from the case study.
Classical Political Economy Theory can be effectively used to explain the decision of JB Hi-Fi to release its profit downgrade
through expounding on crucial attributes presented by the theory. The classical political economy theory is a school of thought
proposed by main thinkers such as Adam Smith and John Stuart Mill. The main ideology behind this theory is the fact that market
economies are extensively self-regulating systems that are governed by natural laws of production as well as exchange (Mosco, 2014).
The vital message regarding this theory is the argument that the wealth of any nation is determined not by gold in the monarch’s
coffers as most people may perceive but by its national income. The income is in-turn embedded in the labour of its inhabitants and the
use of the accumulated capital (Gilpin, 2016). Drawing this close to the JB Hi-Fi case study, the institution is presented as pragmatic
liberals who are actively involved in advocating for the freedom of the market. The organization operates from the perspective that it is
not in all cases that the market is the best way to serve the common interest. In the article, ASX made inquiries as to why JB Hi-Fi
made the inclusion of its downgrade in the slides presented to the investment conference as opposed to a stand-alone “market
sensitive” initiative (Wilson, 2014). In this case, this was a crackdown on a company that released its market sensitive materials, which
included downgrades under embed market sensitive information into general market releases. In its defence, JB Hi-Fi argued that the

company had not considered the effect that the 3 percent downgrade would have on its share price.
Institutional theorists hold on to the ideology that states that an institutional environment can influence the development of the
formal structures in an organisation. Technically, this is often more profound than the market pressure. Simply put, institutional theory
contends that a firm’s legitimacy explains survival. A relevant example from Meyer, Scott and Deal (1981) states that a school will
succeed if everyone agrees that it is a school. On the other hand, it is most likely for it to fail if no one believes that it is a school
despite the nature of its success in socialization or instruction (Suddaby, 2015). Relatively, the concept of institutional theory can be
used to expound on the understanding of the pressures for institutions to become extensively more similar. In the long run, this tends to
decrease institutional diversity. Traditionally, it has been made clear that organizations most of the time conform to easily recognizable
as well as acceptable standards within the organizational field. In relation, this helps foster aspects such as organization’s legitimacy.
Generally, institutional theory reveals how exactly deliberate as well as accidental choices lead institutions to mirror not only the
norms, but also the values and ideology of the organizational field. It is therefore safe to argue that organizations that meet
environmental expected characteristics prove worthy of resources by the broader environment and hence receive legitimacy. Relevant
examples in support of the arguments presented can be extracted from the operations of JB Hi-Fi.
References:
Gilpin, R. (2016). The political economy of international relations. Princeton University Press.

Mosco, V. (2014). Political Economy. In The Routledge Companion to Global Popular Culture (pp. 35-44). Routledge.
Suddaby, R. (2015). Can institutional theory be critical?. Journal of Management Inquiry, 24(1), 93-95.
Wilson, G. (2014). Money for nothing. Money, 19(297).
Marker’s Comments: The marker will provide feedback here. Mark (10):
0
Exceeds Expectations
(High Distinction) 85-100%
Exceeds Expectations
(Distinction) 75 - 84%
Meets Expectations
(Credit) 65 – 74%
Meets Expectations
(Pass) 50 – 64%
Below Expectations
(Fail) below 50%
Demonstrates a balanced and very
high level of detailed knowledge of
core concepts by providing a very
high level of analysis. Utilises
current, appropriate and credible
sources.
Demonstrates a balanced and high
level of knowledge of core
concepts by providing a high level
of analysis. Utilises mostly current,
appropriate and credible sources.
Demonstrates a good level of
knowledge of some of the core
concepts by providing some level
of analysis. Utilises some current,
appropriate and credible sources.
Demonstrates limited knowledge of
core concepts by providing a
limited level of analysis. Utilises
few current, appropriate and
credible sources.
Demonstrates little, if any,
knowledge of the core concepts
with extremely limited, if any,
analysis. Utilises little, if any,
current, appropriate and credible
sources.
Quality of writing at a very high
standard. Paragraphs are
coherently connected to each
other. Correct grammar, spelling
and punctuation.
Quality of writing is of a high
standard. Paragraphs are mostly
well structured. Few grammar,
spelling and punctuation mistakes.
Quality of writing is of a good
standard. Few grammar, spelling
and punctuation mistakes.
Some problems with sentence
structure and presentation
Frequent grammar, punctuation
and spelling mistakes. Use of
inappropriate language.
Quality of writing is at a very poor
standard so barely
understandable. Many spelling
mistakes. Little or no evidence of
proof reading.
The assessment presents a
detailed and focused summary of
the ideas presented; drawing clear
and well thought-out conclusions.
The assessment presents a fairly
detailed and focused summary of
the ideas presented; drawing fairly
clear and well thought-out
conclusions.
The assessment presents a
somewhat detailed and focused
summary of the ideas presented;
providing some evidence of
conclusions.
The assessment provides limited
detail with no clear summary of the
ideas presented; drawing limited
conclusions.
The assessment fails to provide
any clear evidence of the ideas
presented; drawing no clear
conclusions.

Question 2: Use the Managerial branch of Stakeholder Theory to explain JB Hi-Fi’s reporting decisions. Make sure
you support your observations with evidence from the case study.
The managerial branch of Stakeholders Theory can be used to explain JB Hi-Fi reporting decisions. The managerial branch of
the stakeholder theory is a unique aspect of the theory credited to the numerous intriguing information that it offers. Consequently, the
theory predicts that managers will attempt to manage the relationship that exists between the organisation and various stakeholders to
ensure that the goals of the institution are achieved. Technically, it is argued that the more important the stakeholders are to the
organisation regarding achieving its goals, the more the efforts that will be invested in managing the existing relationship (Fernando &
Lawrence, 2014). In relation, the disclosure of relevant information, just as in the case of JB Hi-Fi is considered as a very significant
strategy in managing the said relationship. Drawing a closer look at the case study, it was vital for JB Hi-Fi to have adopted the
reporting decision that it did because of the managerial branch of stakeholder’s theory advocates for the same. Additionally, the theory
also holds that not all stakeholder groups will receive the same level of treatment. On the contrary, some rights can be ignored if they
do not hold any relevance to the operations of the organisation (Bouten & Hoozée, 2015). In the simplest terms, the managerial branch
of the stakeholder theory holds that the power of stakeholders to influence management will be directly influenced by the stakeholder’s
control over the resources that are vital for the organisation’s operations. In the words of Ullman (1985, p.2), organizations technically
survive to the extent that they are effective, in relation, this effectiveness derives from the management demands. The demands in this

case are drawn from the interest groups upon which the organization is embedded.
On the other hand, a branch of the theory that refutes the arguments presented by the managerial branch is the ethical branch.
Generally, the ethical branch of the stakeholder theory is extensively concerned with the responsibilities of an organization. In relation,
this branch does not hold the view that the rights of people should be controlled by how powerful they are (Kent & Zunker, 2017).
Consequently, researchers affiliated to this branch argue that all stakeholders should equally benefit from the existence of the
organization. The exclusive benefit should therefore not be based on the concept of who has more power than the other. Such
considerations according to the theory do not bring about the needed decorum while making attempts to achieve an institution’s goals.
A relevant example includes: stakeholders should not have the right to dominate over the rights and interest of others for when this is
done, the ethical aspect of the company’s operation is scrapped off (Rashid, 2015). It is important to acknowledge the fact that there
exist a number of certain key rights that cannot be compromised. Considering the fact that the ethical branch of the stakeholder theory
provides extensive information about how exactly a management should carry out itself, the theory cannot be validated or invalidated
by the use of empirical investigation. In the simplest terms, the theory does not set out to predict how managers are expected to behave
but on the contrary, the theory prescribes how exactly the should behave.
References:
Bouten, L., & Hoozée, S. (2015). Challenges in sustainability and integrated reporting. Issues in Accounting Education Teaching

Notes, 30(4), 83-93.
Fernando, S., & Lawrence, S. (2014). A theoretical framework for CSR practices: integrating legitimacy theory, stakeholder theory and
institutional theory. Journal of Theoretical Accounting Research, 10(1), 149-178.
Kent, P., & Zunker, T. (2017). A stakeholder analysis of employee disclosures in annual reports. Accounting & Finance, 57(2), 533-
563.
Rashid, A. (2015). The influence of stakeholder power on corporate social responsibility: evidence from a relationship-based
economy. Social Responsibility Journal, 11(2), 270-289.
Marker’s Comments: The marker will provide feedback here. Mark (10):
0
Exceeds Expectations
(High Distinction) 85-100%
Exceeds Expectations
(Distinction) 75 - 84%
Meets Expectations
(Credit) 65 – 74%
Meets Expectations
(Pass) 50 – 64%
Below Expectations
(Fail) below 50%
Demonstrates a balanced and very
high level of detailed knowledge of
core concepts by providing a very
high level of analysis. Utilises
current, appropriate and credible
sources.
Demonstrates a balanced and high
level of knowledge of core
concepts by providing a high level
of analysis. Utilises mostly current,
appropriate and credible sources.
Demonstrates a good level of
knowledge of some of the core
concepts by providing some level
of analysis. Utilises some current,
appropriate and credible sources.
Demonstrates limited knowledge of
core concepts by providing a
limited level of analysis. Utilises
few current, appropriate and
credible sources.
Demonstrates little, if any,
knowledge of the core concepts
with extremely limited, if any,
analysis. Utilises little, if any,
current, appropriate and credible
sources.
Quality of writing at a very high
standard. Paragraphs are
coherently connected to each
other. Correct grammar, spelling
and punctuation.
Quality of writing is of a high
standard. Paragraphs are mostly
well structured. Few grammar,
spelling and punctuation mistakes.
Quality of writing is of a good
standard. Few grammar, spelling
and punctuation mistakes.
Some problems with sentence
structure and presentation
Frequent grammar, punctuation
and spelling mistakes. Use of
inappropriate language.
Quality of writing is at a very poor
standard so barely
understandable. Many spelling
mistakes. Little or no evidence of
proof reading.
The assessment presents a
detailed and focused summary of
the ideas presented; drawing clear
The assessment presents a fairly
detailed and focused summary of
the ideas presented; drawing fairly
The assessment presents a
somewhat detailed and focused
summary of the ideas presented;
The assessment provides limited
detail with no clear summary of the
ideas presented; drawing limited
The assessment fails to provide
any clear evidence of the ideas
presented; drawing no clear

Exceeds Expectations
(High Distinction) 85-100%
Exceeds Expectations
(Distinction) 75 - 84%
Meets Expectations
(Credit) 65 – 74%
Meets Expectations
(Pass) 50 – 64%
Below Expectations
(Fail) below 50%
and well thought-out conclusions. clear and well thought-out
conclusions.
providing some evidence of
conclusions.
conclusions. conclusions.

Question 3: To what extent do current share prices anticipate future earnings announcements? Use the case
study to support your answer.
Current share prices anticipate future earnings announcements in numerous ways. Drawing from examples of quarterly earnings
reports, they are important because they offer financial updates that provide the needed market glimpse of how stocks will be valued in
the times to come. Traditionally, it has been noted that stocks prices tend to rise when earnings results surpass market expectations. On
the other hand, disappointing earnings tend to ultimately result in lower share prices. In relation, just as in the case of JB Hi-Fi, stock
prices are driven by market expectations. Relatively, the 20 percent increase in its quarterly income cannot be classified as positive
considering the fact that the market expectation was 40%. The same argument can be used in support of the ideology that a 10 percent
decrease in earnings can cause a stock to go up in the event that its expectation has a much larger decline (Dechow, Sloan & Zha,
2014). In relation, the concept of market expectation for JB Hi-Fi plays a very vital role in its operations. When there is no market
expectations, there exist very little correlation between stock prices as well as earning growth results. Statistical data has through the
years shown that the correlation between historical three day returns of the stocks that exist in the PSE index and the results of the first
quarter earnings announcement can only be approximated to roughly 12.8%. However, all hope is not lost because when the element of
market expectations is added so that the stock prices fall, the correlation is expected to significantly improve to up to 41 percent.

Measuring market expectations is also a very significant concept. Stock brokers use consensus of earning estimates that are normally
prepared by research analysts in the market. In this case, the median estimate is used as the basis for the comparison (Drake, et al.,
2015). The second most important concept in this trend is the earning game. Considering the fact that quarterly earnings results evoke
market reactions, negative impacts that face the stock prices are technically most of the time short-term. Subsequently, this is where the
concept of the earning game comes in, the historical behaviour enables organizations take advantage of the current volatility in the
market. In relation, JB Hi-Fi acknowledge and abide by the argument that just because some of its stocks tumbled as a result of
disappointed earnings, it does not positively determine that they are not good investment opportunities anymore (Even-Tov, 2017).
Another very significant concept is market reactions. Relatively, institutional investors are considered as people who are highly
sensitive to quarterly earnings and stocks reports. In relation, research has determined that market reactions to earning reports are
particularly stronger at firms with bigger market capitalization. Subsequently, this is credited to the fact that institutional investors
when reacting to surprises tend to dictate short-term direction of any stock as a result of the sheer size of their investments. In summary
of this main point, having extensive knowledge of historical tendencies of stocks can help in anticipating possible earnings surprises as
well as trade on positive news. Additionally, earnings momentum is also relatively crucial because it pays to research stocks that report
significant quarterly earnings growth.
References:

Dechow, P. M., Sloan, R. G., & Zha, J. (2014). Stock prices and earnings: A history of research. Annu. Rev. Financ. Econ., 6(1), 343-
363.
Drake, M. S., Myers, J. N., Myers, L. A., & Stuart, M. D. (2015). Short sellers and the informativeness of stock prices with respect to
future earnings. Review of Accounting Studies, 20(2), 747-774.
Even-Tov, O. (2017). When does the bond price reaction to earnings announcements predict future stock returns?. Journal of
Accounting and Economics, 64(1), 167-182.
Marker’s Comments: The marker will provide feedback here. Mark (10):
0
Exceeds Expectations
(High Distinction) 85-100%
Exceeds Expectations
(Distinction) 75 - 84%
Meets Expectations
(Credit) 65 – 74%
Meets Expectations
(Pass) 50 – 64%
Below Expectations
(Fail) below 50%
Demonstrates a balanced and very
high level of detailed knowledge of
core concepts by providing a very
high level of analysis. Utilises
current, appropriate and credible
sources.
Demonstrates a balanced and high
level of knowledge of core
concepts by providing a high level
of analysis. Utilises mostly current,
appropriate and credible sources.
Demonstrates a good level of
knowledge of some of the core
concepts by providing some level
of analysis. Utilises some current,
appropriate and credible sources.
Demonstrates limited knowledge of
core concepts by providing a
limited level of analysis. Utilises
few current, appropriate and
credible sources.
Demonstrates little, if any,
knowledge of the core concepts
with extremely limited, if any,
analysis. Utilises little, if any,
current, appropriate and credible
sources.
Quality of writing at a very high
standard. Paragraphs are
coherently connected to each
other. Correct grammar, spelling
and punctuation.
Quality of writing is of a high
standard. Paragraphs are mostly
well structured. Few grammar,
spelling and punctuation mistakes.
Quality of writing is of a good
standard. Few grammar, spelling
and punctuation mistakes.
Some problems with sentence
structure and presentation
Frequent grammar, punctuation
and spelling mistakes. Use of
inappropriate language.
Quality of writing is at a very poor
standard so barely
understandable. Many spelling
mistakes. Little or no evidence of
proof reading.
The assessment presents a
detailed and focused summary of
the ideas presented; drawing clear
and well thought-out conclusions.
The assessment presents a fairly
detailed and focused summary of
the ideas presented; drawing fairly
clear and well thought-out
conclusions.
The assessment presents a
somewhat detailed and focused
summary of the ideas presented;
providing some evidence of
conclusions.
The assessment provides limited
detail with no clear summary of the
ideas presented; drawing limited
conclusions.
The assessment fails to provide
any clear evidence of the ideas
presented; drawing no clear
conclusions.

Question 4: Show how the Brunswik Lens Model might be used to explain an investor's decision about whether
to buy or sell shares in JB Hi-Fi following their downgrade “announcement”.
Several normative models for individual decision making differ in terms of their complexity and emphasis. The Brunswick
Lens Model has been extensively used with a great deal of success reported. The model has been known to provide a nice conceptual
framework for viewing as well as appreciating the decision process. In this particular case, the model will be used to explain the
investor’s decision on whether to buy or even sell shares in JB Hi-Fi following their announcement that covered the aspects of its
downgrade. In order to understand how this model works, it is vital to break down its main components so as to achieve a deeper
understanding of what it entails (Newell & Shanks, 2014). The model asserts that the decision process is comprised of three essential
elements: the basic information in the situation, the actual decision made by the decision maker and the correct decision which should
have been made to address the particular situation.
Drawing this context closer to the case study, it is vital for the investor to take a great deal of time in the basic information
segment. In this case, the investor has at his or her disposal several cues which he or she is expected to make use of or fail to make use
of in the process (Newell, Lagnado & Shanks, 2015). There are obviously a wide variety of decision options that the investor may
decided to choose from and hence help him or her to make the most convenient decision. Examples of the decision variables may
include: current stocks, general market indicators, and even advice from other business partners or investors. Generally, the listed

variables present key potential cue variables that can be used to make viable and conclusive decisions. The next step in the model is the
actual decision made by the decision maker. Subsequently, this can also be referred to as the observed decision. It is equally important
to acknowledge the fact that any decision process ends with a response of some sort, even if the response is choosing not to respond
(Orquin, 2014). Consequently, the making of a decision will technically have to involve a choice of action. In this case, the decision
behaviour, and the choice behaviour can be viewed as quite indistinguishable.
The following figure will be used to access the course of action that the investor will need to come to a conclusive decision.
(Lens model paradigm for the decision-making process)

In summary, the final main level of the model is the correct decision. In this case, this optimal decision is a representation of the
best optimal response or choice linked with the decision. In the investors perspective, it will represent the ultimate criterion against
which the actual decision should have been evaluated (Libby, 2017). Therefore, it has been determined that the Brunswick Lens Model
emphasises on three distinctive stages. The stages are the input level, information processing level and finally the output level. The
levels are inter-related, and each one of them builds from the other. Relatively, the model is a very useful model in explaining an

investor's decision about whether to buy or sell shares in JB Hi-Fi following their downgrade announcement.
References:
Libby, R. (2017). Accounting and human information processing. In The Routledge Companion to Behavioural Accounting
Research (pp. 42-54). Routledge.
Newell, B. R., & Shanks, D. R. (2014). Unconscious influences on decision making: A critical review. Behavioral and Brain
Sciences, 37(1), 1-19.
Newell, B. R., Lagnado, D. A., & Shanks, D. R. (2015). Straight choices: The psychology of decision making. Psychology Press.
Orquin, J. L. (2014). A Brunswik lens model of consumer health judgments of packaged foods. Journal of Consumer Behaviour, 13(4),
270-281.
Marker’s Comments: The marker will provide feedback here. Mark (10):
0
Exceeds Expectations
(High Distinction) 85-100%
Exceeds Expectations
(Distinction) 75 - 84%
Meets Expectations
(Credit) 65 – 74%
Meets Expectations
(Pass) 50 – 64%
Below Expectations
(Fail) below 50%
Demonstrates a balanced and very
high level of detailed knowledge of
core concepts by providing a very
high level of analysis. Utilises
current, appropriate and credible
sources.
Demonstrates a balanced and high
level of knowledge of core
concepts by providing a high level
of analysis. Utilises mostly current,
appropriate and credible sources.
Demonstrates a good level of
knowledge of some of the core
concepts by providing some level
of analysis. Utilises some current,
appropriate and credible sources.
Demonstrates limited knowledge of
core concepts by providing a
limited level of analysis. Utilises
few current, appropriate and
credible sources.
Demonstrates little, if any,
knowledge of the core concepts
with extremely limited, if any,
analysis. Utilises little, if any,
current, appropriate and credible
sources.
Quality of writing at a very high Quality of writing is of a high Quality of writing is of a good Some problems with sentence Quality of writing is at a very poor

Exceeds Expectations
(High Distinction) 85-100%
Exceeds Expectations
(Distinction) 75 - 84%
Meets Expectations
(Credit) 65 – 74%
Meets Expectations
(Pass) 50 – 64%
Below Expectations
(Fail) below 50%
standard. Paragraphs are
coherently connected to each
other. Correct grammar, spelling
and punctuation.
standard. Paragraphs are mostly
well structured. Few grammar,
spelling and punctuation mistakes.
standard. Few grammar, spelling
and punctuation mistakes.
structure and presentation
Frequent grammar, punctuation
and spelling mistakes. Use of
inappropriate language.
standard so barely
understandable. Many spelling
mistakes. Little or no evidence of
proof reading.
The assessment presents a
detailed and focused summary of
the ideas presented; drawing clear
and well thought-out conclusions.
The assessment presents a fairly
detailed and focused summary of
the ideas presented; drawing fairly
clear and well thought-out
conclusions.
The assessment presents a
somewhat detailed and focused
summary of the ideas presented;
providing some evidence of
conclusions.
The assessment provides limited
detail with no clear summary of the
ideas presented; drawing limited
conclusions.
The assessment fails to provide
any clear evidence of the ideas
presented; drawing no clear
conclusions.

Question 5: Some academics have criticised the accounting profession for acting to legitimise the capitalist
system (supposedly by supporting the “haves” against the “have nots”. Indicate whether the case study
supports the critical view of accounting, or whether it doesn’t. Use the case study to support your answer.
The question of the accounting profession, and whether it supports the public interest or the capital interest is one that is highly
controversial and has through the years provoked mixed reactions from the stakeholders involved. The accounting profession, being an
integral facet of the society, has its role deep-rooted in both the state as well as corporate sector. In relation, it is highly expected of it
to serve the public interest. The central question however remains, is it serving this purpose or the pressure from the society has
moulded it into serving the interest of the capital. The accounting standard setting process can be used to reflect the capacity of the
Australian accounting profession in serving the public interest. Specific references can also be made from CLERP Act and ASIC Act.
The combined effects of the listed acts are to technically legislate bias so that to manipulate and ensure that accounting standards
privilege the needs of the capital holders, in other words, capital interest (Guthrie & Parker, 2016). Relatively, there has been a
growing assumption that capital markets are surrogate for the public interest. In relation, it has been made quite clear that if the
accounting profession follows the national objectives to support capital markets, it is most likely that it will undermine the role of it
serving the society.
The case study contends with the underlying view that the accounting profession acts to legitimise the capitalist system. Just as
it has previously been argued out, the accounting profession is a vital facet of the society in general (Mintz, 2016). Subsequently,

accounting has evolved from society and is hence socially constructed and is also socially constructing. Consequently, this can be
taken to mean that the profession influences the society and that it is also influenced by the society. In the words of Solomon (1978),
the accounting profession should ensure that it does not confuse its role which is striving for the representational faithfulness of
accounting standards with the role of accommodating national objectives. When this is done, the key stakeholders diminish their
capacity to serve the society and ultimately, everyone is likely to lose. With all these controversial arguments presented, it is safe to
argue that the Australian accounting profession’s capacity to serve the public interest of the society has extensively diminished (Tucker
& Schaltegger, 2016). Wyatt in “The public rightfully expects” (2004, p. 52) argues that the accounting profession has through the
years been expected to be practical, intellectual and also have high regard for the public. Therefore, upholding these characteristics is
the key to how the accounting profession will retain its relevancy. Additionally, an important aspect of this profession, just as the other
related professions is that they ascribe to status or privileged position in the society. In regards, the haves is presented as the group of
people with more societal privileges than the have-nots. It is therefore justified to argue that criticism that points out that the
accounting profession act to legitimise the capitalist system is profound and relatively true. It is, therefore, necessary for the involved
stakeholders to re-evaluate the strategies through which the profession operates.
References:
Guthrie, J., & Parker, L. D. (2016). Whither the accounting profession, accountants and accounting researchers? Commentary and