The Effect of Personality Traits and Fairness on Honesty in Managerial Reporting

Drake, Andrea; Matuszewski, Linda J.; Miller, Fabienne

doi:10.1108/s1474-7871(2013)0000022008

Cited by 6 publications

(8 citation statements)

References 27 publications

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“…One group, being satisfied with their earned income (10 percent of the total), appears consistent with economic theory. Another, avoiding hurting someone (19 percent), is consistent with literature on how concerns about fairness and equity influence reporting decisions (Cohen et al ; Cohen et al ; Drake et al ; Fehr and Schmidt ; Maas and Van Rinsum ). The desire not to hurt someone else can also be linked to the notion of caring, which, similar to fairness, has been associated with morality (Graham et al ) .…”

Section: Development and Validation Of The Measuressupporting

confidence: 82%

Why Are People Honest? Internal and External Motivations to Report Honestly

Murphy

Wynes

Hahn

et al. 2020

Contemporary Accting Res

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We create and validate measures capturing internal and external motivations to report honestly as trait‐like characteristics. Both measures have high levels of reliability, as well as convergent and divergent validity. To test their predictive validity, we conduct two experiments. In the first experiment, MTurk participants have the opportunity and incentive to misreport with no immediate consequences, and in the second experiment, participants with management experience report how they would make a hypothetical accounting allocation decision. In both experiments, we find that participants who are higher in internal motivations to report honestly are more likely to report honestly than those lower in internal motivations, confirming this measure's predictive validity. Both experiments also provide limited support for the predictive validity of our external measure, finding that those who are higher in external motivation do not report differently than those who are lower in external motivations in the absence of controls. Our study also reveals that individuals who are higher in internal motivations have a diminished reaction to different management controls: MTurk participants to a control that punishes misreporting, and manager participants to a control that rewards honest reporting. Results suggest that management and those charged with governance should consider that some employees can react negatively to controls that are perceived as constraining. Our measures are useful to researchers who investigate honest reporting by allowing them to identify, ex ante, individuals who want to be honest versus wanting to appear honest.

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Section: Development and Validation Of The Measuressupporting

confidence: 82%

Why Are People Honest? Internal and External Motivations to Report Honestly

Murphy

Wynes

Hahn

et al. 2020

Contemporary Accting Res

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“…Prior research in accounting also suggests that individuals value fairness and equity in resource allocation settings (Libby 2001;Zhang 2008;Drake, Matuszewski, and Miller 2013) and in fact, individuals are often willing to exert costly effort to redress perceived unfairness (e.g., Schatzberg and Stevens 2008;Maas, Van Rinsum, and Towry 2012). To the extent that high vertical pay dispersion induces advantageous inequity aversion, the superior may set more lenient cost thresholds to reduce perceived pay inequity for subordinates (i.e., the subordinate is allowed to keep more of the project surplus).…”

Section: Hypothesis 1-superiorsmentioning

confidence: 99%

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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“…Perceptions of unfairness have previously been linked to increase misreporting by subordinates (Fisher et al, 2015). In resource allocation settings, individuals tend to value fairness and equity (Drake, Matuszewski, & Miller, 2014). Asymmetric information has been found to predict budgetary slack creation (Andriyansah & Zahra, 2017).…”

Section: Introductionmentioning

confidence: 99%

“…Managers are less likely to create budgetary slack whenever they perceive fair budgetary procedures (Fisher et al, 2015). Given that pay relative to referents affects individuals' pay satisfaction more than absolute pay (Williams, McDaniel, & Nguyen 2006), pay equity and social comparison play an important role in equity evaluation (Drake et al, 2014).…”

Section: Introductionmentioning

confidence: 99%

“…When individuals perceive budgetary goals as fair and attainable, they are less likely to manipulate information to achieve personal rewards (Clor-Proell, Kaplan, & Proell, 2015). Additionally, perceived equity within reward systems has been linked to honesty in budgeting (Drake et al, 2014). Moreover, when individuals perceive inequity, negative reactions can result in efforts to restore the perception of equity (Clor-Proell et al, 2015).…”

Section: Introductionmentioning

confidence: 99%

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Horizontal Equity, Self-Efficacy, and Budgetary Slack: Comparing American and Brazilian Cultures

2022

ijafr

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This study analyzed the effect cross-cultural differences in perceived horizontal equity and self-efficacy have on the creation of budgetary slack. This research addressed the gap in the role of ethical ideology in business by empirically examining the influence of culture on an individual’s ethical ideology and their propensity to create budgetary slack. A total of 803 subjects included 413 individuals from America and 390 from Brazil. A series of analysis of variance testing identified statistical significance between horizontal equity and the creation of budgetary slack, as well as statistically significant differences between low/high years of experience and budgetary slack levels. Additional cross tabulations were included related to both horizontal equity as well as self-efficacy. The results highlight budgetary procedures that may impact a person’s perceptions of fairness in pay compared to colleagues or peers with similar positions in organizations. Findings suggest that employees with more years of professional experience could benefit from education on potential negative unintended consequences of creating slack in their budgetary decisions. Our findings may be used by managers to gain awareness of this significance and take necessary steps to create equitable pay policies and budgetary targets. Study results indicated no statistical difference in slack levels between Americans and Brazilians.

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The Effect of Personality Traits and Fairness on Honesty in Managerial Reporting

Cited by 6 publications

References 27 publications

Why Are People Honest? Internal and External Motivations to Report Honestly

Why Are People Honest? Internal and External Motivations to Report Honestly

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

Horizontal Equity, Self-Efficacy, and Budgetary Slack: Comparing American and Brazilian Cultures

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