Despite the many undesirable outcomes of corporate misconduct, scholars have an inadequate understanding of corporate misconduct's causes and mechanisms. We extend the behavioral theory of the firm, which traditionally assumes away the possibility of firm impropriety, to develop hypotheses predicting that top management incentive compensation and poor organizational performance relative to aspirations increase the likelihood of financial misrepresentation. Using a sample of financial restatements prompted by accounting irregularities and identified by the U.S. Government Accountability Office, we find empirical support for both incentive and relative performance influences on financial statement misrepresentation.
{"title":"Incentives to Cheat: The Influence of Executive Compensation and Firm Performance on Financial Misrepresentation","authors":"Jared D. Harris, P. Bromiley","doi":"10.1287/orsc.1060.0241","DOIUrl":"https://doi.org/10.1287/orsc.1060.0241","url":null,"abstract":"Despite the many undesirable outcomes of corporate misconduct, scholars have an inadequate understanding of corporate misconduct's causes and mechanisms. We extend the behavioral theory of the firm, which traditionally assumes away the possibility of firm impropriety, to develop hypotheses predicting that top management incentive compensation and poor organizational performance relative to aspirations increase the likelihood of financial misrepresentation. Using a sample of financial restatements prompted by accounting irregularities and identified by the U.S. Government Accountability Office, we find empirical support for both incentive and relative performance influences on financial statement misrepresentation.","PeriodicalId":199069,"journal":{"name":"SEIN Social Impacts of Business eJournal","volume":"37 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2006-10-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116561041","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
A.D.H. Dhanushka, S. Herath, Anjula Godakumbura, Suthaharan Rasaiha, D. Venkatesh, Niwantha Ekanayake
The paper explores the current situation of the Information Technology (IT) education in Sri Lanka with particular emphasis on problems encountered, and recommends policy reforms to develop the industry. IT has been the phenomenon of the 20th century, and will continue to play an important part in this century as well. For a country such as Sri Lanka IT is an ideal tool that can help economic growth by empowering the people. The public as well as the government has identified this, and currently there is a great demand for IT education. As a result many IT training facilities have been established by the government and the private sector. The report initially observes the present situation in the industry. The importance of developing the industry in a country such as Sri Lanka, and existing policies are discussed in the subsequent sections. In the early stages the industry evolved on its own with little or no long term planning, regulatory policies or standardization. Many other issues such as language, costs, inadequate practical training and lack of qualified teachers, were encountered. These issues are explored in detail in section that follows. The report then leads into a set of general recommendations and suggests policy reforms aimed at gearing the industry to play a greater role in economic growth in the country.
{"title":"IT Education Industry in Sri Lanka: The Way Forward","authors":"A.D.H. Dhanushka, S. Herath, Anjula Godakumbura, Suthaharan Rasaiha, D. Venkatesh, Niwantha Ekanayake","doi":"10.2139/ssrn.956901","DOIUrl":"https://doi.org/10.2139/ssrn.956901","url":null,"abstract":"The paper explores the current situation of the Information Technology (IT) education in Sri Lanka with particular emphasis on problems encountered, and recommends policy reforms to develop the industry. IT has been the phenomenon of the 20th century, and will continue to play an important part in this century as well. For a country such as Sri Lanka IT is an ideal tool that can help economic growth by empowering the people. The public as well as the government has identified this, and currently there is a great demand for IT education. As a result many IT training facilities have been established by the government and the private sector. The report initially observes the present situation in the industry. The importance of developing the industry in a country such as Sri Lanka, and existing policies are discussed in the subsequent sections. In the early stages the industry evolved on its own with little or no long term planning, regulatory policies or standardization. Many other issues such as language, costs, inadequate practical training and lack of qualified teachers, were encountered. These issues are explored in detail in section that follows. The report then leads into a set of general recommendations and suggests policy reforms aimed at gearing the industry to play a greater role in economic growth in the country.","PeriodicalId":199069,"journal":{"name":"SEIN Social Impacts of Business eJournal","volume":"37 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2006-09-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"129024755","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2006-09-14DOI: 10.1515/9781400837366.204
E. Ostrom, David Van Martin Schwab
This paper argues that trust-enhancing institutions are needed to support economic activity, and shows that these institutions become more complex to deal with information asymmetry among economic actors. Using Crawford and Ostrom's (2005) institutional grammar, it tracks the development of trust-enhancing institutions from a theorized "state of nature" where actors can only rely on shared strategies, to the development of norms to stabilize expectations, and finally to the rise of the rule-based institutions such as the Law Merchant as a means to handle more complex informational asymmetry. The paper concludes with recommendations for sound institutional design, suggesting that improper design can "crowd out" people's natural sense of trust and result in failure to achieve desired outcomes.
{"title":"The Vital Role of Norms and Rules in Maintaining Open Public and Private Economies","authors":"E. Ostrom, David Van Martin Schwab","doi":"10.1515/9781400837366.204","DOIUrl":"https://doi.org/10.1515/9781400837366.204","url":null,"abstract":"This paper argues that trust-enhancing institutions are needed to support economic activity, and shows that these institutions become more complex to deal with information asymmetry among economic actors. Using Crawford and Ostrom's (2005) institutional grammar, it tracks the development of trust-enhancing institutions from a theorized \"state of nature\" where actors can only rely on shared strategies, to the development of norms to stabilize expectations, and finally to the rise of the rule-based institutions such as the Law Merchant as a means to handle more complex informational asymmetry. The paper concludes with recommendations for sound institutional design, suggesting that improper design can \"crowd out\" people's natural sense of trust and result in failure to achieve desired outcomes.","PeriodicalId":199069,"journal":{"name":"SEIN Social Impacts of Business eJournal","volume":"66 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2006-09-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128493902","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper presents a positive theory of corporate social responsibility set in a managerial capitalism context in which managers instead of markets allocate resources, including social expenditures. The theory focuses jointly on the operational management of the firm and on its social expenditures as influenced by a compensation contract chosen by shareholders in a capital market that prices social expenditures. The theory provides three explanations for compensation systems that encompass social performance. First, consumers may reward the firm for its social expenditures; second, managers may have personal preferences for contributing to social causes; and third, the shareholder clientele a firm attracts may prefer social expenditures. The more consumers reward the firm for its social expenditures the higher powered are the profit incentives, so management compensation in increasing in corporate social expenditures. In the theory firms with higher ability managers have both higher operating profits and higher social expenditures when times are good, so a positive correlation is predicted. In bad times, however, the correlation is negative, except for firms with very low ability managers in very bad times, where the correlation is zero.
{"title":"Managerial Contracting and Corporate Social Responsibility","authors":"D. Baron","doi":"10.2139/ssrn.937945","DOIUrl":"https://doi.org/10.2139/ssrn.937945","url":null,"abstract":"This paper presents a positive theory of corporate social responsibility set in a managerial capitalism context in which managers instead of markets allocate resources, including social expenditures. The theory focuses jointly on the operational management of the firm and on its social expenditures as influenced by a compensation contract chosen by shareholders in a capital market that prices social expenditures. The theory provides three explanations for compensation systems that encompass social performance. First, consumers may reward the firm for its social expenditures; second, managers may have personal preferences for contributing to social causes; and third, the shareholder clientele a firm attracts may prefer social expenditures. The more consumers reward the firm for its social expenditures the higher powered are the profit incentives, so management compensation in increasing in corporate social expenditures. In the theory firms with higher ability managers have both higher operating profits and higher social expenditures when times are good, so a positive correlation is predicted. In bad times, however, the correlation is negative, except for firms with very low ability managers in very bad times, where the correlation is zero.","PeriodicalId":199069,"journal":{"name":"SEIN Social Impacts of Business eJournal","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2006-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130335453","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Cheryl J Wakslak, Y. Trope, N. Liberman, Rotem Alony
Conceptualizing probability as psychological distance, we draw on construal level theory (Trope & Liberman, 2003) to propose that decreasing an event's probability leads individuals to represent the event by its central, abstract, general features (high-level construal) rather than by its peripheral, concrete, specific features (low-level construal). Results indicated that when reported probabilities of events were low rather than high, participants were more broad (Study 1) and inclusive (Study 2) in their categorization of objects, increased their preference for general rather than specific activity descriptions (Study 3), segmented ongoing behavior into fewer units (Study 4), were more successful at abstracting visual information (Study 5), and were less successful at identifying details missing within a coherent visual whole (Study 6). Further, after exposure to low as opposed to high probability phrases, participants increasingly preferred to identify actions in ends-related rather than means-related terms (Study 7). Implications for probability assessment and choice under uncertainty are discussed.
{"title":"Seeing the Forest When Entry is Unlikely: Probability and the Mental Representation of Events","authors":"Cheryl J Wakslak, Y. Trope, N. Liberman, Rotem Alony","doi":"10.2139/ssrn.946239","DOIUrl":"https://doi.org/10.2139/ssrn.946239","url":null,"abstract":"Conceptualizing probability as psychological distance, we draw on construal level theory (Trope & Liberman, 2003) to propose that decreasing an event's probability leads individuals to represent the event by its central, abstract, general features (high-level construal) rather than by its peripheral, concrete, specific features (low-level construal). Results indicated that when reported probabilities of events were low rather than high, participants were more broad (Study 1) and inclusive (Study 2) in their categorization of objects, increased their preference for general rather than specific activity descriptions (Study 3), segmented ongoing behavior into fewer units (Study 4), were more successful at abstracting visual information (Study 5), and were less successful at identifying details missing within a coherent visual whole (Study 6). Further, after exposure to low as opposed to high probability phrases, participants increasingly preferred to identify actions in ends-related rather than means-related terms (Study 7). Implications for probability assessment and choice under uncertainty are discussed.","PeriodicalId":199069,"journal":{"name":"SEIN Social Impacts of Business eJournal","volume":"57 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2006-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"132169786","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
People are often motivated to be entertaining. Past work has shown that those given entertainment goals tell stories differently than those given accuracy goals (e.g. Dudukovic, Marsh, & Tversky, 2004). In three studies we investigate the influence of the motive to entertain on story distortion. In each study, we found that the motive to entertain was related to story distortion. For instance, participants who opened a cockroach-infested container of food exaggerated the size of cockroaches when describing the event to a confederate, and participants telling a group of peers about the first time they got drunk claimed to have been more drunk than when they told the same story to a tape recorder. Furthermore, it was also the case the distorting influence of the motive to tell a good story occasionally occurred without awareness, influencing not only their descriptions of the events but their memories of them as well.
{"title":"The Truth Never Stands in the Way of a Good Story: The Distortion of Stories in the Service of Entertainment","authors":"Jeremy Burrus, J. Kruger, Amber Jurgens","doi":"10.2139/ssrn.946212","DOIUrl":"https://doi.org/10.2139/ssrn.946212","url":null,"abstract":"People are often motivated to be entertaining. Past work has shown that those given entertainment goals tell stories differently than those given accuracy goals (e.g. Dudukovic, Marsh, & Tversky, 2004). In three studies we investigate the influence of the motive to entertain on story distortion. In each study, we found that the motive to entertain was related to story distortion. For instance, participants who opened a cockroach-infested container of food exaggerated the size of cockroaches when describing the event to a confederate, and participants telling a group of peers about the first time they got drunk claimed to have been more drunk than when they told the same story to a tape recorder. Furthermore, it was also the case the distorting influence of the motive to tell a good story occasionally occurred without awareness, influencing not only their descriptions of the events but their memories of them as well.","PeriodicalId":199069,"journal":{"name":"SEIN Social Impacts of Business eJournal","volume":"2 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2006-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"124846067","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
People tend to overestimate their contribution to joint tasks, in part because their own contributions are more memorable than the contributions of their collaborators. We examined some of the interpersonal consequences of this bias. Participants engaged in either a hypothetical (Experiment 2) or real (Experiment 1) cooperative task and learned how their collaborator ostensibly allocated responsibility. We varied how much credit the collaborator took for herself, and also how much credit she gave to the participant, factors confounded in past research. In each experiment, collaborators who stole the glory were seen as less fair, harder to get along with, and less honest than were collaborators who did not. Interestingly, this effect was driven by one's own contribution being underappreciated more than one's collaborator's contribution being overstated. Mediational analyses revealed that the discord could be traced to the attribution of biased responsibility judgments to self-interest on the part of one's collaborator.
{"title":"The Interpersonal Implications of Stealing the Glory","authors":"Jeremy Burrus, J. Kruger, K. Savitsky","doi":"10.2139/ssrn.946191","DOIUrl":"https://doi.org/10.2139/ssrn.946191","url":null,"abstract":"People tend to overestimate their contribution to joint tasks, in part because their own contributions are more memorable than the contributions of their collaborators. We examined some of the interpersonal consequences of this bias. Participants engaged in either a hypothetical (Experiment 2) or real (Experiment 1) cooperative task and learned how their collaborator ostensibly allocated responsibility. We varied how much credit the collaborator took for herself, and also how much credit she gave to the participant, factors confounded in past research. In each experiment, collaborators who stole the glory were seen as less fair, harder to get along with, and less honest than were collaborators who did not. Interestingly, this effect was driven by one's own contribution being underappreciated more than one's collaborator's contribution being overstated. Mediational analyses revealed that the discord could be traced to the attribution of biased responsibility judgments to self-interest on the part of one's collaborator.","PeriodicalId":199069,"journal":{"name":"SEIN Social Impacts of Business eJournal","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2006-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"117130742","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Joyce Ehrlinger, Kerri L. Johnson, D. Dunning, J. Kruger, Matthew Banner
People are typically overly optimistic when evaluating the quality of their performance on social and intellectual tasks. In particular, poor performers grossly overestimate their performances because their incompetence deprives them of the skills needed to recognize their deficits. Five studies demonstrated that poor performers lack insight into their shortcomings even in real world settings and when given incentives to be accurate. An additional meta-analysis showed that it was lack of insight into their own errors (and not mistaken assessments of their peers) that led to overly optimistic estimates among poor performers. Along the way, these studies ruled out recent alternative accounts that have been proposed to explain why poor performers hold such positive impressions of their performance.
{"title":"Why the Unskilled are Unaware: Further Explorations of (Absent) Self-Insight Among the Incompetent","authors":"Joyce Ehrlinger, Kerri L. Johnson, D. Dunning, J. Kruger, Matthew Banner","doi":"10.2139/ssrn.946242","DOIUrl":"https://doi.org/10.2139/ssrn.946242","url":null,"abstract":"People are typically overly optimistic when evaluating the quality of their performance on social and intellectual tasks. In particular, poor performers grossly overestimate their performances because their incompetence deprives them of the skills needed to recognize their deficits. Five studies demonstrated that poor performers lack insight into their shortcomings even in real world settings and when given incentives to be accurate. An additional meta-analysis showed that it was lack of insight into their own errors (and not mistaken assessments of their peers) that led to overly optimistic estimates among poor performers. Along the way, these studies ruled out recent alternative accounts that have been proposed to explain why poor performers hold such positive impressions of their performance.","PeriodicalId":199069,"journal":{"name":"SEIN Social Impacts of Business eJournal","volume":"8 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2006-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"121973058","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Many surveys rely on peoples' ability to report accurately about others' behavior. However, the mechanism by which this is done is not well understood. We test a conceptual model that posits the processes by which respondents answer questions about others and the accuracy of such reports. Specifically, we examine how judgment strategy moderates the effects of behavioral regularity on reporting accuracy, and explore the effects of knowledge on response accuracy. Findings suggest that respondents' ability to accurately estimate another persons' behavior increases with the regularity of the behavior and the closeness of the relationship. We discuss the theoretical implications for understanding how memory structures about others affect prediction judgment processes, and the practical implications for organizational and consumer surveys.
{"title":"Reporting About Others' Behavior: The Role of Judgment Strategy, Knowledge, and Regularity","authors":"Joan M Phillips, Barbara A. Bickart, G. Menon","doi":"10.2139/ssrn.946247","DOIUrl":"https://doi.org/10.2139/ssrn.946247","url":null,"abstract":"Many surveys rely on peoples' ability to report accurately about others' behavior. However, the mechanism by which this is done is not well understood. We test a conceptual model that posits the processes by which respondents answer questions about others and the accuracy of such reports. Specifically, we examine how judgment strategy moderates the effects of behavioral regularity on reporting accuracy, and explore the effects of knowledge on response accuracy. Findings suggest that respondents' ability to accurately estimate another persons' behavior increases with the regularity of the behavior and the closeness of the relationship. We discuss the theoretical implications for understanding how memory structures about others affect prediction judgment processes, and the practical implications for organizational and consumer surveys.","PeriodicalId":199069,"journal":{"name":"SEIN Social Impacts of Business eJournal","volume":"49 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2006-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130510301","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
J. Kruger, Paul D. Windschitl, John R. Chambers, Jeremy Burrus, F. Fessel
Prior work has found that when people compare themselves with others they egocentrically focus on their own strengths and contributions and pay less attention to strengths and contributions of the comparison group. As a consequence, individuals tend to overestimate their comparative standing when absolute standing is high and underestimate their comparative standing when absolute standing is low. The present research investigated a rational interpretation of this bias namely, that people are egocentrically focused because they have more knowledge about themselves than about others. Support for this hypothesis was found in three studies, one concerning comparative judgments of responsibility and two others concerning confidence in competitions. These results suggest that there is a rational side to egocentrism in social comparisons.
{"title":"The Rational Side of Egocentrism in Social Comparisons","authors":"J. Kruger, Paul D. Windschitl, John R. Chambers, Jeremy Burrus, F. Fessel","doi":"10.2139/ssrn.946232","DOIUrl":"https://doi.org/10.2139/ssrn.946232","url":null,"abstract":"Prior work has found that when people compare themselves with others they egocentrically focus on their own strengths and contributions and pay less attention to strengths and contributions of the comparison group. As a consequence, individuals tend to overestimate their comparative standing when absolute standing is high and underestimate their comparative standing when absolute standing is low. The present research investigated a rational interpretation of this bias namely, that people are egocentrically focused because they have more knowledge about themselves than about others. Support for this hypothesis was found in three studies, one concerning comparative judgments of responsibility and two others concerning confidence in competitions. These results suggest that there is a rational side to egocentrism in social comparisons.","PeriodicalId":199069,"journal":{"name":"SEIN Social Impacts of Business eJournal","volume":"55 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2006-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127616938","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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