Browsing ETDs: Virginia Tech Electronic Theses and Dissertations by Department "Accounting and Information Systems"
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- Accounting Choice in Troubled Companies: An Examination of Earnings Management by NASDAQ Firms in Jeopardy of DelistingBelski, William Houston (Virginia Tech, 2004-05-28)The purpose of this research is to examine whether managers of troubled firms engage in income-increasing earnings management for capital market purposes to maintain a listing on the NASDAQ National Market. Troubled firms are defined as those firms whose share price has fallen below the specified dollar-per-share minimum mandated by the market. The two hypotheses attempt to answer two separate, but interrelated questions: First, do managers of troubled firms engage in earnings management more in periods of distress than in periods of non-distress? And second, do managers of troubled firms engage in earnings management more than similar firms not in jeopardy of delisting? Both a time-series and cross-sectional approach is used to answer these questions. The initial grouping consisted of all NASDAQ National Market firms with a share price of $1 or below at some point during the period from March 1997 through September 2002. The final sample consisted of 215 firms for the time-series analysis and 495 firms for the cross-sectional analysis. Two accrual expectation models were used, including the Jones (1991) and the modified Jones Model (Dechow, Sloan, and Sweeney, 1995). The results were unable to confirm that managers engage in this behavior, and similar to the results of DeAngelo, DeAngelo, and Skinner (1994), the findings suggest that managers' accounting choices primarily reflect their firms' financial difficulties, rather than attempts to inflate income through discretionary accruals. After controlling for reverse stock splits, dividend reductions, going-concern issues/bankruptcy, and changes in management, the models found significantly negative abnormal accruals. The dissertation concludes with a discussion of possible interpretations for the findings.
- Accounting data and stock returns across business-cycle associated valuation change periodsKane, Gregory D. (Virginia Tech, 1992-11-06)This study examines intertemporal variation in the associations of accounting data with subsequent firm returns. A number of accounting research studies pool data indiscriminately across time and firms. Previous research has disclosed the nature and effects of cross-sectional dependencies in pooled data. On the other hand, intertemporal dependencies associated with real macroeconomic phenomena have not been widely researched. The objective of this study was to provide evidence as to whether accounting data's associations with subsequent firm returns systematically vary across recession-associated and expansion-associated valuation change periods. Eighty-two accounting ratios were examined for evidence of systematic variation in association across business cycle-associated valuation events. Analyses are conducted, using both simple and multiple regression. Business cycle effects on the predictive accuracy of regression models were also examined.
- Accounting for Business Combinations: A Test for Long-Term Market MemoryChatraphorn, Pongprot (Virginia Tech, 2001-12-19)The purpose of this research is to examine whether accounting methods for business combinations (purchase and pooling-of-interests accounting) have a different effect on firms' market value of equity in the combination year and thereafter. In particular, after the accounting method is no longer disclosed in the financial statements, does it have an impact on market value of equity of the combined firms because the accounting figures are different? A five-year period subsequent to a particular business combination is used because public companies are not required to disclose the details of the combination for more than three years after the effective date of the combination. This research, thus, tests whether market participants still take into consideration the accounting method of past business combinations when this information is no longer disclosed in the financial statements. In addition to the testing of the impact of the accounting methods, the value-relevance of goodwill amortization is investigated. The sample consisted of 100 U.S. business combination transactions during the period 1985–1995 (77 pooling firms and 23 purchase firms). The results do not indicate that market participants price pooling firms and purchase firms differently at the time of business combinations. The results, in addition, do not confirm that when the details of a particular business combinations do not appear in the financial statements, pooling firms' accounting figures have a more positive effect on security prices than those of purchase firms. It seems that market participant are able, even in the long term, to account for the accounting difference between purchase and pooling-of-interests. Also, goodwill amortization does not appear to be value relevant.
- Accounting variables, stock splits and when-issued tradingKemerer, Kevin L. (Virginia Tech, 1990-12-18)When-issued trading, the contractual agreement for the sale and purchase of shares to be issued in the future (when-issued securities), typically occurs after stock split announcements. Curiously, when-issued trading does not always exist for a stock-splitting firm's shares even though the shares are eligible for when-issued trading. Although stock splits have been the subject of a large number of studies, intriguing questions concerning these events remain unanswered. In particular, academia has yet to explain adequately the positive average abnormal returns associated with stock split announcements. These two peculiar phenomena are examined. A major objective of this dissertation is to determine whether there are systematic differences between those stock-splitting firms whose shares are traded on a when-issued basis and those whose shares arc not. A logistic regression model was constructed, using information with respect to nine accounting variables, to determine if there are systematic differences in accounting information that are useful in classifying stock-splitting firms as being associated with when-issued trading. The classification accuracy of the logistic regression model was significantly better than a random walk model, but was not better than the maximum chance model. The results of the final model indicate that size of the stock-splitting firm is the most significant factor affecting the probability that a stock-splitting firm's shares are traded on a when-issued basis. The probability that a stock-splitting firm's shares will be traded on a when-issued basis increases with firm size. The presence/absence of when-issued trading indicates that investors do not react to stock splits in a consistent manner. Therefore, the stock price behavior around the stock split announcements was examined and the difference in the reaction to announcements of when-issued traded and non-when-issued traded firms was tested for statistical significance. The results indicate that the market responds more favorably to the stock split announcements made by non-when-issued traded firms. The variation in the stock price behavior over a two-day stock split announcement period was analyzed cross-sectionally to determine whether the market reaction displayed through stock prices is related to selected accounting variables. Again, size was the most significant factor. In this case, size was negatively related to the stock price behavior suggesting that stockholders of larger firms earn lower abnormal returns. Another interpretation would be that stock splits are viewed more favorably if authorized by smaller firms. Overall, the results of this study suggest that all stock-splitting firms are not similar and that the market does not react consistently to the announcement of stock splits of all firms. It seems that the larger the firm, the more likely its shares will be traded on a when-issued basis after the stock split is announced. Furthermore, the market does not react as positively to stock split announcements of larger firms as it does to announcements of smaller firms. My conclusion is that larger firms are more efficiently valued and, accordingly, the announcements of stock splits by larger firms are less informative than for smaller ones.
- Analyst Coverage and Tax Reporting AggressivenessMcInerney, Megan Michelle (Virginia Tech, 2010-04-02)The role of analysts in corporate governance has been examined extensively in the accounting literature. Two conflicting representations of the influence of analysts have emerged. Analysts are either viewed as external monitors of corporate behavior, thereby reducing agency costs; or they are viewed as exerting additional pressure on management to meet earnings forecasts, which may contribute to aggressive corporate behavior. Studies exist that examine the impact of analyst coverage in a financial reporting context. The purpose of this study is to examine the role of analysts in the corporate tax reporting context. This dissertation examines the impact of analyst coverage on corporate tax aggressiveness using a cross-section of publicly traded firms between 1992 and 2006. Permanent discretionary book-tax differences are used to proxy for tax aggressiveness. The relation is examined using ordinary least squares regression as well as two-stage least squares regression using expected coverage and inclusion in the S&P 500 index as instrumented variables to account for the endogeneity of analyst coverage selections. Additional analyses investigate the impact of analyst characteristics: experience as an analyst, experience covering a specific firm and identification as a top analyst. Results indicate that analyst coverage is associated with lower levels of tax aggressiveness. This finding suggests that analysts serve as external monitors of corporate tax behavior. In addition, more experienced analysts are associated with lower levels of tax aggressiveness indicating an improvement in monitoring ability with experience. Analysts identified as All-American analysts by Institutional Investor magazine are associated with higher levels of tax aggressiveness. This result suggests that top analysts may view aggressive tax behavior as a wealth creation tool for firms.
- Analyst Herding, Shareholder Investment Horizon, and Management Earnings GuidanceWhite, Todd Palmer (Virginia Tech, 2012-04-04)This dissertation examines the characterization of transient investors by financial analysts. Transient investors have been portrayed in the literature as either 1) informed investors or 2) poor monitors. No research to date, however, has examined how financial analysts, who are important information intermediaries, characterize transient investors. A view of transient investors through the lens of a financial analyst is obtained through examining how the presence of transient owners in a firm affects financial analysts' decision making. Specifically, this study examines how transient ownership affects both the propensity of analysts to herd when issuing earnings forecasts for a given firm as well as the incidence with which analysts revise their forecasts when the firm issues earnings guidance. Empirical tests show that financial analysts exhibit a greater propensity to herd when there are transient investors present. The proposed reason for this effect is analysts are herding due to reputational concerns. Further testing, however, does not show that the relation between transient ownership and analyst herding is owed to poor monitoring behavior of transient-owned firms. In contrast, evidence is consistent with the hypothesis that the firm information environment of transient-owned firms is an important cause of analyst herding. In summary, evidence is consistent with the informed investor portrayal of transient investors and there is no evidence indicating financial analysts view transient owners as poor monitors. Finally, when the decision of analysts to issue revised forecasts is examined, it is found that having a higher percentage of the firm owned by dedicated or long-term investors increased the propensity of analysts to issue a revised forecast. Thus, while my analysis is inconsistent with a poor monitoring portrayal of transient investors, results suggest that a dedicated investor base can enhance the perceived credibility of firm disclosures.
- Auditors' Use of Formal Advice from Internal Firm Subject Matter Experts: The Impact of Advice Quality and Advice Awareness on Auditors' JudgmentsWright, Nicole S. (Virginia Tech, 2014-07-21)During an audit, if an audit team does not have sufficient knowledge when auditing a complex issue they often call upon subject matter experts to provide advice. While these experts are the knowledge experts in their area, the quality of the advice depends upon their ability to fully understand and incorporate client specific facts. PCAOB inspection reports suggest that audit teams are neglecting to perform the required work to assess the quality of experts' recommendations. Additionally, the decision to use subject matter experts can be made during planning or when a complex issue surfaces during the audit. As such, auditors may or may not be a priori aware that an expert's use is planned before auditing a complex issue. In this dissertation, I examine how receiving advice of different levels of quality in terms of whether it incorporated all relevant client facts (lower or higher), and a priori awareness of the use of a subject matter expert (aware or unaware), can impact auditors' use of the advice and the resulting effort and judgment accuracy. I conducted a computerized experiment where professional auditors read a case study and made an initial judgment around a complex issue, received advice, and then made a final judgment. Based on advice-taking literature, I predict and find support that auditors who are a priori unaware of the use of a subject matter expert will employ lower effort in understanding the client facts and thus be less discerning and more accepting of the advice received. Being a priori unaware and receiving low quality advice can lead to lower judgment accuracy than receiving high quality advice with a priori unawareness. Auditors who are a priori aware are expected to, and found to employ greater effort, thus reducing the accuracy differences between receiving high and low quality advice. These findings can help improve the professions' understanding of auditors' advice taking behavior and the conditions under which expert advice is accepted without performing the required quality assessment.
- Board composition and the use of accounting measures: the effect on the relation between CEO compensation and firm performanceEllingson, Dee Ann Hetland (Virginia Tech, 1996-04-05)Boards of directors of corporations have been criticized for failing to effectively perform their roles of ratifying and monitoring managerial decisions, retaining and terminating top management, and evaluating and rewarding executive performance. critics have suggested that increasing the proportion of outside directors on the board increases independence and improves board effectiveness. Research has provided evidence that the composition of the board affects firm performance, the likelihood of chief executive turnover, and the monitoring of important decisions such as the adoption of poison pills and acquisitions. In this study, the effect of the composition of the board on the relationship between executive compensation and firm performance is investigated. The effect of board composition on the types of performance measures, accounting and stock return, used in the pay-performance relationship is also examined. Data were gathered from publicly available sources, including Forbes compensation surveys, firms’ proxy statements, and COMPUSTAT and CRSP tapes. These data were then statistically analyzed using a regression model with indicator variables for outsider-dominated boards. The types of performance measures, accounting and stock return, were then compared to test whether their usage in the pay-performance relationship differs between outsider-dominated and insider-dominated boards. The results of this study indicate that the association between compensation and stock return measures of performance is stronger when the board is composed of a majority of outside directors. There is no evidence, however, of a stronger association between compensation and accounting measures of performance for outsider-dominated boards. The results also reveal that outsider-dominated boards use both accounting and stock return measures of performance in the pay-performance relationship whereas insiders focus on accounting measures. These results imply that outside directors act in the interests of shareholders by linking compensation to stock return measures as well as accounting measures of performance. These findings are consistent with the conclusions of other board composition studies that outside directors play an important role in the corporate governance process.
- The CAPM approach to materialityHadjieftychiou, Aristarchos (Virginia Tech, 1993-06-25)Materiality is a pervasive accounting concept that has defied a precise quantitative definition. The Capital Asset Pricing Model (CAPM) approach to materiality provides a means for determining the limits that bound materiality. Also, the approach makes it possible to locate the point estimate within these limits based on certain assumptions.
- Cellular manufacturing: applicability and system designLeu, Yow-yuh (Virginia Tech, 1991-08-07)As competition has intensified, many American manufacturers have sought alternatives to rejuvenate their production systems. Cellular manufacturing systems have received considerable interest from both academics and practitioners. This research examines three major issues in cellular manufacturing that have not been adequately addressed: applicability, structural design, and operational design. Applicability, in this study, is concerned with discerning the circumstances in which cellular manufacturing is the system of choice. The methodology employed is simulation and two experimental studies are conducted. The objective of Experiment I, a 2 x 3 x 3 factorial design, is to investigate the role of setup time and move time on system performance and to gain insight into why and how one layout could outperform another. The results of Experiment I suggest that move time is a significant factor for job shops and that workload variation needs to be reduced if the performance of cellular manufacturing is to be improved. Experiment II evaluates the impact of setup time reduction and operational standardization on the performance of cellular manufacturing. The results of Experiment II suggest that cellular manufacturing is preferred if the following conditions exist: (1) well balanced workload, (2) standardized products, (3) standardized operations, and (4) setup times independent from processing times.
- CEO compensation and managerial decisions: evidence from acquisitionsBlazer, Eric L. (Virginia Tech, 1996-05-13)While there is a wide body of literature examining the relation between CEO compensation and firm performance, few studies have directly tested the proposition that a strong pay-performance link: leads to improved future performance. This paper tests the hypothesis that a strong pay-performance link: leads to better managerial decisions. Following Jensen and Murphy's (1990b) methodology, pay-performance sensitivities are estimated for the CEOs of 105 NYSE and AMEX firms. The relation between the estimated pay-performance sensitivities and subsequent acquisition performance is examined for a sample of 140 acquisitions over the period 1980-86. Acquisition performance is measured by cumulative abnormal announcement returns for the event windows: , (-1,+1], [- 5, + 1], [- 5, +40], and [- 20, +40]. After controlling for other variables that are related to acquisition performance, a significant positive relation is observed between measures of pay-performance sensitivity and subsequent acquisition performance. The results suggests that a strong pay performance link may better align CEO and shareholder interest, and lead to improved future CEO performance. In addition, evidence is presented that suggests that optimal compensation design should jointly consider both stock options and traditional forms of compensation.
- CEO Severance Agreements and Tax AvoidanceStancill, Alan Jonathan (Virginia Tech, 2015-12-02)This study investigates the association between CEO severance agreements and corporate tax avoidance. Severance agreements, by providing executives with additional compensation when there is a change in employment status, should serve to encourage additional risk-taking, as reflected by increased tax avoidance activities. Using a large sample of aggregate compensation data, I find some evidence of a relation between the presence of a CEO severance agreement and tax avoidance. Using a smaller sample of hand-collected data, I find a significant negative relation between the magnitude of cash severance pay and tax avoidance and a significant positive relation between the magnitude of equity severance pay and tax avoidance. Overall, this study provides evidence that the structure and magnitude of severance agreements are related to tax avoidance.
- CEO-to-worker Pay Disparity and the Cost of DebtLei, Lijun (Virginia Tech, 2017-05-03)Prior research on intra-firm pay disparity suggests intra-firm pay disparity at various hierarchy levels affects firm performance and executive-level pay disparity is related to investment risk in the credit and the equity market. However, none of the studies examine the relationship between CEO-to-worker pay disparity and credit investment risk. The purpose of this study is to investigate the association between CEO-to-worker pay disparity on credit investors' risk assessments. Large CEO-to-worker pay disparity could suggest CEO rent extraction which increases credit risk or effective labor cost management that decreases credit risk. Overall results of this study indicate increased CEO-to-worker pay disparity is associated with a lower cost of debt (a higher probability of credit rating upgrades). This association weakens as the growth rate of average employee pay increases and is more pronounced for labor-intensive firms than for capital-intensive firms, suggesting credit investors incorporate the information about the effectiveness of labor cost management in CEO-to-worker pay disparity in their risk assessments. In addition, the negative relationship between the change in CEO-to-worker pay disparity and the change in the cost of debt is less salient when CEO compensation increases rapidly. Further analysis shows the association is attenuated by increased excessive CEO compensation. The findings indicate credit investors also consider the risk arising from CEO rent extraction when they evaluate CEO-to-worker pay disparity.
- Charitable giving and federal income tax policy: additional evidence based on panel-data elasticity estimatesBarrett, Kevin Stanton (Virginia Tech, 1991-08-12)Nearly all traditional charitable-giving studies conclude donors are more responsive to price-reducing charitable deductions (the price effect) than they are to income-reducing tax payments (the income effect). Thus, taxes stimulate giving. In addition, this empirical evidence also indicates that the charitable deduction is treasury efficient. This traditional understanding was recently challenged by studies employing observations on the same individuals across time (panel data). These panel studies provide evidence which suggest that donors are either much more responsive to income reducing tax payments than they are to price-reducing charitable deductions or just as responsive to both. Further, price elasticity estimates are much greater than negative one. Thus, the deduction is inefficient and giving is either neutral to, or inhibited by, taxes.
- The Client Acceptance and Retention Process: How Policies and Procedures Are Developed and Implemented Within Audit FirmsParlier, Jennifer Ashley (Virginia Tech, 2019-06-19)When developing client acceptance and retention policies and procedures, an audit firm's policy-makers are required to adhere to quality control and auditing standards established by the Public Company Accounting Oversight Board (PCAOB) and American Institute of Certified Public Accountants (AICPA) that are not well defined. As a result, the policies and procedures across firms may differ significantly. These differences arise from the development as well as the implementation of client acceptance and retention policies when evaluating prospective and continuing clients. My research study examines these differences in client acceptance and retention policies and procedures and also investigates the potential differences in policies and procedures across firms of different sizes (international, national, and regional). Using a qualitative setting, I interview risk management and local office partners across multiple firms to gather firm-specific and partner-specific information about client acceptance and retention policies and procedures. My results contribute to the existing literature on the processes and procedures developed by audit firms to assess and evaluate risks that may arise from prospective and/or continuing clients.
- Competition, Cost Analytics, and Offsetting Strategies: Pressures and Opportunities on the Fraud TriangleDu Pon, Adam Watanabe (Virginia Tech, 2021-04-05)This study introduces industry competition factors to fraud models to examine how competition associates with fraud risk. I argue that industry competition eclipses many firm-level determinants in their association with fraud risk, and that the cost of poor information elevates fraud risk as competition increases. I find that fraud risk is higher for firms in industries with 1) more substitutable products and services, 2) greater threats of new entry, and 3) larger incumbent pools of competitors, and that substitution exceeds every firm-level variable except size in its relevance with fraud risk. Cross-sectionally, I provide evidence that industry-wide non-adoption of advanced cost analytics (i.e. using obsolete, distortionary standard costing practices) may exacerbate the fraud-risk effects of competition, especially product substitution: a one standard deviation increase in substitution associates with over double the fraud risk for firms in industries typified by obsolete costing practices. I also find that different strategies vary in their fraud-offsetting associations dependent on the type of competition most prevalent in an industry. Together, these findings shed light on how the effects of industry competition may subsume or surpass most firm-level fraud determinants and provide evidence of previously unidentified drawbacks of obsolete cost accounting systems.
- Concurrent optimization in designing for logistics supportHatch, Melanie L. (Virginia Tech, 1994-05-15)The military community has considerable experience in the areas of procuring and managing large systems. These systems are often expected to perform their intended function over a period of several years and as a result, they will require an extensive support structure consisting of personnel, equipment and spare assets. For this reason, Logistics Management has always been an important field within the military and is gaining recognition within private industry as well. The evolutionary process which starts with the identification of a need and continues through design, production and retirement is known as a product's life cycle. Studies have shown that the decisions which are made initially, during the design of the product, will determine 80% of the total system costs. Several efforts have been initiated to improve the product design process and emphasize the life cycle approach. These include; Concurrent Engineering, Logistics Support Analysis (LSA) and Quality Function Deployment (QFD). These efforts necessitate an overhaul of the decision-making methods used in the product design process. Consequently, within the military community and private industry, the time-honored sequential-hierarchical-decision approach to design is being replaced with concurrent decision-making. The sequential process of the hierarchical method can lead to suboptimal designs which significantly increase manufacturing and follow-on support costs.
- The Copycat Effect: Do social influences allow peer team members' dysfunctional audit behaviors to spread throughout the audit team?Wetmiller, Rebecca J. (Virginia Tech, 2019-03-15)Staff auditors often rely on team members as a source of information to determine the behaviors that are normal and acceptable. This may be one cause of the prevalence of audit quality reducing dysfunctional audit behaviors (DAB) within the profession. Social influence theory, applied in an auditing context, posits that staff auditors are influenced not only by the preferences of their superiors (i.e., compliance pressure) but also by their peers' DAB (i.e., conformity pressure). Given the importance of the work performed by staff auditors, I conduct an experiment to identify the role that a peer team member's behavior and a superior's preference plays in influencing staff auditors' behavior. I predict, and find, that staff auditors with a peer team member who engages in a DAB are more likely to engage in a DAB. I also predict, and find, that staff auditors with a superior who has a preference toward efficiency are more likely to engage in a DAB. Finally, I predict that a superior's preference toward efficiency will amplify the influence of a peer team member's involvement in a DAB. Interestingly, I find that a superior's preference amplifies the effect of a peer team member's behavior when it is toward efficiency only, not effectiveness, for a face-to-face request from the client, but not for an email request. These results suggest that peer behavior influences the effect of a superior's preference of staff auditors in the intimidating situation of having a face-to-face interaction with the client. This could be because of the cognitive dissonance staff auditors experience when their general understanding of the standards does not align with their peer's behavior. The results of this study provide insights into a potential risk introduced to the audit engagement through audit team dynamics.
- Credibility of annual management earnings forecasts: theory and evidenceCairney, Timothy D. (Virginia Tech, 1994-05-09)Much of accounting research is predicated on the fact that the capital markets operate well because disclosures of annual earnings are verified. It is generally observed, however, that market responses to the unverified management forecasts may be as strong as responses to similar l verified information disclosures. This dissertation is concerned with the credibility of such unverified information. Three hypotheses are investigated in the study. The data includes managements' annual earnings forecasts gathered from the 1986 to 1992 editions of the Wall Street Journal. The first hypothesis concerns the timing of the disclosure of the forecasts by management. It is tested by comparing liquidity and leverage ratios at the event date to prior same-firm ratios. Evidence is found that supports the conclusion that the firm is preparing the market for a possible capital offering. The second hypothesis concerns the asymmetry of information between the firm and investors. This asymmetry affects the stock market reaction. It is tested using OLS regressions with the market reaction as the dependent variable and various asymmetry surrogates as independent variables. Evidence is found that supports the conclusion that as more investors follow the firm, there is less new information associated with the management forecast disclosure. Further, as fewer investors follow the firm, there is a lower tendency to disclose forecasts. The third hypothesis concerns the ability of the firm to provide credible communication. It is tested using OLS regressions with the market reaction as the dependent variable and various proprietary information surrogates as independent variables. Weak support is found for the conclusion that those firms releasing proprietary information through the forecast disclosure provide more credible communication. The support is restricted to the negative forecasts. For positive forecasts, it may be that reputation is most important to investor response.
- Decision support systems design: a nursing scheduling applicationCeccucci, Wendy A. (Virginia Tech, 1994-01-28)The systems development life cycle (SDLC) has been the traditional method of decision support systems design. However, in the last decade several methodologies have been introduced to address the limitations arising in the use of the traditional method. These approaches include Courban's iterative design, Keen's adaptive design, prototyping and a number of mixed methodologies incorporating prototyping into the SDLC. Each of the previously established design methodologies has a number of differing characteristics that make each of them a more suitable strategy for certain environments. However, in some environments the current methodologies present certain limitations or unnecessary expenditures. These limitations suggest the need for an alternative methodology. This dissertation develops a new methodology, priority design, to meet this need. To determine what methodology would be most effective in a given situation, an analysis of the operating environment must be performed. Such issues as project complexity, project uncertainty, and limited user involvement must be addressed. This dissertation develops a set of guidelines to assist in this analysis. For clarity, the guidelines are applied to three, well-documented case studies. As an application of the priority design methodology, a decision support system for nurse scheduling is developed. The development of a useful DSS for nurse scheduling requires that projected staff requirements and issues of both coverage and differential assignment of personnel be addressed.