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A case study is a puzzle that has to be solved. It is an empirical inquiry that investigates a contemporary phenomenon within its real life context using multiple sources of evidence (Yin, 1989). According to Kaplan (1986), case studies provide a good opportunity to study accounting systems in their context. He wonders why a stronger tradition for this research method does not exit. One possible reason is that accounting researchers have not considered the potential of case study research. Another possible reason is that accounting researchers may view case study research as those studies which have no control as to be of almost no scientific value (Cooper & Morgan, 2008; Hagg & Hedlund, 1979). However, Zimmerman (2001, p 10) said that 'over 15 years have elapsed since the first calls for more field-based research. Such a body of studies now exists. But it has not led to the theory building and testing that was envisioned'. Case study as a scientific method has always been subject to several criticisms, which included lack of both internal and external validity and inability to generalize from single case. However, these criticisms are merely misconceptions about case studies (Cooper & Morgan, 2008).
The main objective in this essay is to assess case study research method in accounting research. To achieve this objective, this essay will start with discussing the nature of case studies followed a critical assessment of the limitation of case study research method. Finally, the essay will discuss the use of case studies in finance research.
2. Nature of Case study
This part will include a discussion of the concept of case study research through analyzing its definition and main types. In addition, it will include an analysis of the nature of case studies in accounting research.
Yin (1994, 2003) defines case study as 'an empirical inquiry' that examines a certain phenomenon in its 'real-life context' when the phenomenon under study is indistinguishable from its context. Also, Cooper and Morgan (2008, p.160) identify case study as 'an in-depth and contextually informed examination of specific organizations or events that explicitly address theory'. Another definition presented by Smith (2003) is that case study implies research which focuses on a single unit. The unique strength in case study method is that it can collect data from different sources: documents, interviews and observation (Smith 2003; Yin 1994).
There are different types of case studies in accounting research, including descriptive, illustrative, experimental, exploratory, explanatory, (Ryan et al. 2002). However, these types are not universal. It is just an indication of different ways of using case studies (Scapens, 2004). These types include the following (Ryan et al. 2002; Scapens, 2004; Smith, 2003):
Descriptive: in which current accounting practices are described with the aim of determining the 'best practices' used by successful companies. It is particularly important in providing information regarding contemporary accounting practices.
Illustrative: in which researchers are trying to illustrate new practices used by an 'innovative' company. However, this method assumes that the practices of these innovative companies are better than practices used by other companies, but it cannot provide a justification for this assumption.
Experimental: this type aims at investigating the benefits and problems associated with the implementation of new accounting practices developed by accounting researchers. However, this type is rarely used in accounting research.
Exploratory: in which the researcher makes a preliminary investigation regarding why and how a particular practice is used.
Explanatory: in which the researcher aims at explaining the reasons behind using specific practices in a particular case.
In recent years, there have been increasing calls from accounting researchers for case studies in accounting. Some of these calls have come from those who see case studies as necessary start to large sample hypothesis testing; alternatively other researchers see that case study help to develop theoretical explanations of accounting practices (Humphrey and Scapens, 1996).
In addition, Zimmerman (2001) affirmed that the major problem of empirical management accounting research is the lack of internal data about what firms do. However, Merchant and Van der Stede (2006) emphasized that the best way to discover these data is to have researchers go to firms and 'digging it' and this what is exactly done by case studies.
Furthermore, Cooper and Morgan (2008) showed that case study is the best way to overcome critics of accounting research - its limited success in producing knowledge and inability of making intellectual and practical contribution - because its usefulness in making questions, analysing issues, developing and testing theory, and providing guidance in solving problems.
In a study conducted by Merchant and Van der Stede (2006) on published field study research in accounting in the period 1981-2004, the researchers found that while the field research method has been used in all accounting areas, its use prevails in management accounting. Also, the publication of ¬eld studies is common in only four journals: Accounting, Auditing and Accountability; Accounting, Organizations and Society; European Accounting Review and Management Accounting Research. Moreover, they emphasizes that 'where it has been used, the contributions of field research have been significant, particularly in finding leading-edge practices and enhancing their scholarly exploration', therefore contributing to understanding of the phenomena and linking research with practice. They argue that while the ¬eld research method is widely used in management accounting, it should be used more by researchers in other areas of accounting. (Merchant and Van der Stede, 2006, p. 118)
3. Analysis of case study limitations:
Case study was subject of several criticisms as a research method. The major criticism stems from the inability to generalize from a single case. Furthermore, the researcher plays the dominating role in the selection of the case, collection and interpretation of data; this may involve a high degree of researcher bias. Moreover, some authors, like Zimmerman (2001), claims that case studies have nothing to do with the theory, i.e. case study is not useful in developing or testing a theory.
Case studies have always been criticized about their generalizability. It is difficult to generalize findings from one case to a larger population or to generalize findings from current setting to different settings (Amaratunga and Baldry, 2001; Bryman and Bell, 2003). The authors of accounting case studies frequently 'apologize that the size of their sample creates difficulties in generalizing their findings' (Ryan et al. 2002, p 148). For example, Ittner et al (2003) point out that their ability to generalize is limited by their use of a single case. Moreover, although the uses of case studies in accounting research have increased in recent years, statistical research methods still dominate because their power to generalize results (Lukka and Kasanen, 1995).
However, before considering generalizability, we have to think about 'questions such as generalizability to what, and for what' (Cooper and Morgan, 2008, p. 173). According to Yin (1994), case studies are generalizable to theoretical framework 'analytic generalization' and not to population 'statistical generalization'. Also, he insists on that a 'fatal flow' is to use statistical generalization when conducting a case study, because the case is not a statistical sample, but it is a theoretical sample. For example, Frow et al (2005) said that their choice of case represents a theoretical sample and in spite of the limited generalizability their study provides a theoretical framework for other researchers to build upon. Thus, the aim of case studies is not to make inference from a sample to population, but to make theoretical generalizability. In addition, Ryan et al. (2002) argues that thinking about case studies as a small sample comes from the positive methodology which focuses on inferring about population from a sample.
Moreover, Lukka and Kasanen (1995) argue that both case and statistical studies have the same probability of reaching to generalizable results. Furthermore, both methods have to provide reasons for their generalizable results 'by using substantial knowledge from the real world: knowledge of prior studies and understanding of the historical and institutional aspects of the phenomenon under study'. (Lukka and Kasanen,1995, p 86)
From another perspective, case studies - through providing a deep understanding of a certain phenomena - may be valuable per se. For example, when conducting a case study about the impact of introducing a new accounting control system in large multinational company, Scapens and Roberts (1993) argue that their case study is not an attempt to make some 'universal truth or generalizable theories'(p.3), but it is their own interpretation of the particularities of the case. Moreover, Flyvbjerg (2006) claims that science is to gain knowledge, and generalization is only one way to gain and accumulate knowledge, and the inability to generalize that knowledge does not mean that it cannot contribute in the knowledge accumulation process . 'A purely descriptive' case study without generalization can be valuable in this process and 'has often helped cut a path toward scientific innovation' (Flyvbjerg, 2006, p 227).
Another major criticism is that case study suffers from a lack of accuracy and the possibility of bias (Amaratunga and Baldry, 2001). Ryan et al. (2002) said that social systems are closely related to human beings and case study researchers must interpret the social reality. Therefore, case studies may involve a high degree of subjectivity (Ryan et al. 2002). According to Bromley (1986), cited in Amaratunga and Baldry (2001), the researcher bias will make the internal validity of data doubtful.
On the other hand, when informed by theory, case studies will involve a lower possibility of bias. Because the theory will guide the researcher's work in selecting the case and collection and interpretation of data, thereby allowing a low degree of subjectivity. Yin (1994) asserts that theory development in advance of data collection is crucial for case studies, whether the goal is to test a theory or to develop a theory. For example, Scapens and Roberts (1993) used theory in their case study to understand observations, which are used in developing theory. Similarly, Marginson (1999) used a theoretical framework which informed the data collection.
Yin (1994, p 10) argues that other research methods are also subject to the same problems, 'but in case study they may have been more frequently encountered and less frequently overcome'. Furthermore, when the case study uses multiple sources for data collection and multiple researchers in coding and interpretation, the likelihood of bias will be very low (Cooper and Morgan, 2008; Smith, 2003). Also, Flyvbjerg (2006) said this critique is 'fallacious' because case study research has proved that it has its own rigor, which is not less than the rigor of quantitative methods.
Cooper and Morgan (2008) see that a further misconception of case study research is the difficulty of replication, because other researchers will not have the same opportunity to study an organization under the same circumstances. However, they said that replication is very difficult is social science in general because of the rapid changes in the technology and environment.
A further limitation, stated by Zimmerman (2001, p 10), 'over 15 years have elapsed since the first calls for more field-based research. Such a body of studies now exists. But it has not led to the theory building and testing that was envisioned'. However, case study method has proved to be useful for both theory building and testing (Kaplan, 1998; Scapens, 2004). Case study is particularly useful for building theories where the phenomenon is vague and there is no theory. For example, Frow el al (2005) has conducted case study with the aim of providing evidence on how firms and their managers in contemporary organizations balance the traditional budgetary controls with the achievement of strategic objectives. In this study the aim of the researchers was to develop a theory, they said that they use case study research because this is a new research area which lack both theory and data. Another study conduced by Marginson (1999) adopted a different approach through focusing on testing multiple theoretical perspectives in studying the process of control of Telco Ltd. He said that this approach allows for the development, modification, or falsifying a particular theoretical perspective. These two examples tell us that case study literature has already been used for testing as well as developing a theory.
Finally, although all previous criticisms of case study can be 'allayed', a high quality case study is very difficult to conduct and it may take too long time (Yin, 1994). Furthermore, given 'the staggering volume of rich data, there is a temptation to build theory which tries to capture every thing', the result is a rich but complex theory (Eisenhardt, 1989, p 547). Another problem according to Merchant and Van der Stede (2006) , is the lack of training among field study researches. They also said that most universities ignore case study method in their business doctoral program. Likewise, Berry and Otley (2004) stressed that case studies are more suitable for Ph.D. students and they also emphasized the importance of research training in these methods.
In response to previous shortcomings of case study research method, some authors propose the use of the notion of triangulation, i.e. multiple research methods, because the strengths of one method may compensate the weaknesses of the other (Amaratunga and Baldry, 2001). Also, Smith (2003) states that the validity and reliability of research can be enhanced by using triangulation. Denzin (1978), cited in Modell (2005), distinguishes between two types of triangulation: within method triangulation and between methods triangulation. Within method triangulation means using different data collection methods within the same method, but between methods triangulation means using different research methods. Merchant (1985), for example, has conducted a case study aiming at exploring how discretionary program decisions are controlled in a decentralized firm. He uses within method triangulation for data collection including a series of unstructured interviews with general and functional mangers in two decentralized firms, review of current literature and questionnaire of profit centre managers in one of the firms. However, according to Modell (2005) between methods triangulation is advantageous in overcoming the bias and validity issues related to the use of single method. Ittner et al (2003) has conducted a case study to examine how subjectivity is incorporated in performance evaluation in major financial service firm. They used statistical hypothesis tests to support their finding. Thus, both qualitative and quantitative methods are used in this study to complement each other, and to increase validity and reliability.
4. Case studies in Finance:
Stoner and Holland (2004) emphasize that the world of finance has changed rapidly in recent years, which justify the need for expanding the conceptual and research framework of finance to include methods such as case studies. They added that modern finance theory ignores the role of individuals in the market, by relying on concepts such as aggregate market reaction. This creates a need for research focusing on individual's actions.
In spite of this, case studies still few in the field of finance and quantitative research methods are dominating methods (Lee and Humphrey, 2006; Stoner and Holland, 2004). Stoner and Holland (2004) used two previous case studies - Holland and Stoner, 1996; and Holland Doran, 1998- to discuss the nature of case study research in finance. It can be concluded from these studies that case study research in finance may face several problems, which limit its use. Research costs may limit the ability to increase the number of cases and time taken in each case. Also, there may be some difficulty in gaining access to corporate decision makers. Another problem, which is common in case study method, is the researcher bias, whether in the selection of the case or in collection and interpretation of data. Finally, there is a difficulty in generalizing the findings, and in summarizing the research article objectively.
Additionally, it can be concluded - based on the cases conducted by Stoner and Holland- that the methodology of a case study in finance has been used in such a way to overcome these problems. Firstly, findings were interpreted using conventional finance theory to increase reliability. Also, Case studies were mainly dependent upon the experience of interviewees without regard to observation because of the difficulty of objective observation. Different researches are involved in the process of interpretation and coding of data to enhance the validity. Multiple cases are used to enhance generalizability. Building relationships with companies and institutions to facilitate access problems. Finally, little prior theoretical structure to make sure that current finance theory does not restrict the research process.
It can be concluded that case study is a method which aims at thoroughly investigating and analyzing a single case using different data collection methods such as interviews, document and observation. Moreover, in recent years case study has received an increasing support as a research method in accounting literature to face the critiques faced by accounting research and to gain a better understanding of the new accounting developments. However, case study as a research method has always been subject to several criticisms, which included; lack of internal validity, lack of external validity, lack of reliability among others. In spite of this, these criticisms can be allayed. It has been suggested that, using different methods for data collection, different researchers in coding and interpretation, and different research methods e.g. case study and survey, can be extremely useful in increasing validity and reliability of case studies.