Information Acquisition and Opportunistic Behavior in Managerial Reporting

Church, Bryan K.; Hannan, R. Lynn; Kuang, Xi

doi:10.1111/1911-3846.12036

Cited by 40 publications

(26 citation statements)

References 79 publications

(160 reference statements)

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“…Our results suggest that vertical pay dispersion can potentially compromise the fiduciary role played by superiors and may lead to increases in budgetary slack. This finding adds to the recent literature that demonstrates superiors can have goals that are incongruent with those of the firm's owner (Church, Hannan, and Kuang , ). Our findings also have important practical implications for compensation practice and are especially relevant for firms intending to motivate performance by widening vertical pay dispersion.…”

Section: Introductionsupporting

confidence: 68%

The Effects of Vertical Pay Dispersion: Experimental Evidence in a Budget Setting

Guo

Libby

Liu

2016

Contemporary Accting Res

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Vertical pay dispersion is the difference in pay across different hierarchical levels within an organization (Milkovich and Newman 1996). While vertical pay dispersion may be useful in attracting, retaining, and motivating highly skilled employees (Lazear and Rosen 1981;Lazear 1995;Prendergast 1999), our study investigates a potential disadvantage; specifically, the negative impact of perceived unfairness of vertical pay dispersion on employees' budgeting decisions. We predict and find that high vertical pay dispersion motivates subordinates to misreport costs to a greater extent than low vertical pay dispersion. Furthermore, we predict and find that superiors, on average, exercise more lenient cost controls when vertical pay dispersion is high rather than low. Supplemental analysis indicates superiors are more lenient on average because of their aversion to inequity caused by vertical pay dispersion. Our results suggest that high vertical pay dispersion can compromise the overall corporate budgeting environment, where higher levels of misreporting by subordinates goes unchecked by superiors.Les r epercussions de la dispersion verticale des salaires :observations exp erimentales en contexte budg etaireLa dispersion verticale des salaires est l' ecart salarial entre diff erents echelons hi erarchiques au sein d'une organisation (Milkovich et Newman, 1996). Même si la dispersion verticale des salaires peutêtre utile pour attirer, fid eliser et motiver des employ es hautement comp etents (Lazear et Rosen, 1981;Lazear, 1995;Prendergast, 1999), elle risque de pr esenter un inconv enient qu' etudient les auteurs : l'incidence n egative de l'iniquit e perc ßue de la dispersion

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Section: Introductionsupporting

confidence: 68%

The Effects of Vertical Pay Dispersion: Experimental Evidence in a Budget Setting

Guo

Libby

Liu

2016

Contemporary Accting Res

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“…From strict quasi-concavity of information utility function [6], we can see: when numerator is greater than zero and f 1 , f 2 > 0, thus d 2 q2 dq 2 1 > 0. From the nature of convex function [10], we can see that slope increase progressively when information utility indifference curve is convex.…”

Section: Yang / Research On Enterprise Information Utility Indiffementioning

confidence: 99%

“…Bryan etcs. predict that discretion may promote opportunistic reporting behavior because it allows managers to avoid relevant information, suggest that the ability to exploit opportunities afforded by discretion in information acquisition is a potential cost when weighing the costs and benefits of assigning decision rights to managers by means of experiments, and highlight the importance of considering a manager's ethical type when assigning decision rights [6].…”

Section: Introductionmentioning

confidence: 99%

Research on enterprise information utility indifference curve of big data time

Yang

2015

JCM

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Based on the characters of information, a model of information utilities indifference curve has been build which combined information abundance and rechness. The information utilities indifference curve has been explained and discussed, and then analyses how enterprise choose information combination based on cost bind, that is the equilibrium condition of enterprise realizing the most satisfactory information utilities combination, and points out that the formed equilibrium must be broked by the advancement of information technology, this impels the change of enterprise's behavior model and organization structure, the new equilibrium comes into being.

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“…Dunk and Nouri (1998) identify slack as any intentional underestimation of production capabilities or overestimation of costs. This concept of intentional misstatement has led more recent studies to focus on opportunistic behaviors associated with slack-as opposed to other motivations for slack, such as guarding against uncertainty (e.g., Evans et al 2001;Hannan et al 2006;Rankin et al 2008;Hannan et al 2010;Church et al 2012Church et al , 2014Newman 2014;Douthit and Stevens 2015). 3 Brown et al (2009) maintain that agency theory should still serve as the foundation in the examination of participative budgeting because of the tractable predictions it generates.…”

Section: Participative Budgeting and Honesty In Reportingmentioning

confidence: 99%

The Effect of Individual and Pooled Profit Sharing Plans on Honesty in Managerial Reporting

Boster

Majerczyk

2018

Contemporary Accting Res

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Many organizations offer profit sharing plans to motivate increased effort and goal congruence. However, an unintended consequence of such plans may be to reduce honesty in managerial reporting. We investigate two commonly observed profit sharing plans (individual and pooled) in a laboratory experiment where multiple agents with private cost information submit budget requests to an employer. Consistent with our prediction based on crowding theory, our findings suggest that honesty is reduced in the presence of an individual profit sharing plan. However, when a pooled profit sharing plan is used, the adverse effects on honesty are partially mitigated. Our results suggest that an unintended consequence of profit sharing (decreased honesty) can be mitigated through interdependency from pooled plans. The results have practical implications, given that organizations have flexibility in establishing both the size and scope of their profit sharing plans. Our study also contributes to our understanding of reporting behavior, particularly in multi‐agent settings.

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Information Acquisition and Opportunistic Behavior in Managerial Reporting

Cited by 40 publications

References 79 publications

The Effects of Vertical Pay Dispersion: Experimental Evidence in a Budget Setting

The Effects of Vertical Pay Dispersion: Experimental Evidence in a Budget Setting

Research on enterprise information utility indifference curve of big data time

The Effect of Individual and Pooled Profit Sharing Plans on Honesty in Managerial Reporting

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