We develop a general norm-dependent utility function with disutility for actions that are inferior or superior to a norm. We test its validity by assessing the moderating role of norm sensitivity in explaining responses to peer influences in a budget reporting experiment. Managers become less honest after seeing a less honest peer (the rotten apple effect) and more honest after seeing a more honest peer (the sterling example effect). We measure the sensitivity to social norms by the Maintaining Norms Schema score generated from the responses to the Defining Issue Test-2 moral reasoning questionnaire. We find that (1) the sterling example effect is significantly increased in an individual’s sensitivity to social norms and (2) the rotten apple effect does not vary significantly with an individual’s sensitivity to social norms. Our evidence supports inclusion of a disutility component for actions that are inferior to the norm in representations of personal preferences. JEL Classifications: C72, D03; J44; M41; M55.
{"title":"Rotten Apples and Sterling Examples: Norm-Based Moral Reasoning and Peer Influences on Honesty","authors":"Steven Huddart, Hong Qu","doi":"10.2308/jmar-2022-011","DOIUrl":"https://doi.org/10.2308/jmar-2022-011","url":null,"abstract":"\u0000 We develop a general norm-dependent utility function with disutility for actions that are inferior or superior to a norm. We test its validity by assessing the moderating role of norm sensitivity in explaining responses to peer influences in a budget reporting experiment. Managers become less honest after seeing a less honest peer (the rotten apple effect) and more honest after seeing a more honest peer (the sterling example effect). We measure the sensitivity to social norms by the Maintaining Norms Schema score generated from the responses to the Defining Issue Test-2 moral reasoning questionnaire. We find that (1) the sterling example effect is significantly increased in an individual’s sensitivity to social norms and (2) the rotten apple effect does not vary significantly with an individual’s sensitivity to social norms. Our evidence supports inclusion of a disutility component for actions that are inferior to the norm in representations of personal preferences.\u0000 JEL Classifications: C72, D03; J44; M41; M55.","PeriodicalId":46474,"journal":{"name":"Journal of Management Accounting Research","volume":null,"pages":null},"PeriodicalIF":1.7,"publicationDate":"2024-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"139458298","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}
Evelyn C. Braumann, Martin R. W. Hiebl, Arthur Posch
Research on enterprise risk management (ERM) has increased considerably in the past two decades. Although management accounting researchers have substantially contributed to these advancements, previous reviews of the ERM literature have not discussed in depth the role of ERM as part of the organizational control package and how management accounting research could build on its research traditions to further our collective understanding of ERM. In this paper, we therefore adopt a management control perspective to critically analyze both quantitative and qualitative empirical ERM research and specifically focus on the integration of ERM in organizational control packages. Taking a complementarity perspective and accounting for the decision-facilitating and decision-influencing purposes of management accounting and control systems (MACS), we recommend several broader avenues for future management accounting research on ERM.
{"title":"Enterprise Risk Management as Part of the Organizational Control Package: Review and Implications for Management Accounting Research","authors":"Evelyn C. Braumann, Martin R. W. Hiebl, Arthur Posch","doi":"10.2308/jmar-2021-071","DOIUrl":"https://doi.org/10.2308/jmar-2021-071","url":null,"abstract":"\u0000 Research on enterprise risk management (ERM) has increased considerably in the past two decades. Although management accounting researchers have substantially contributed to these advancements, previous reviews of the ERM literature have not discussed in depth the role of ERM as part of the organizational control package and how management accounting research could build on its research traditions to further our collective understanding of ERM. In this paper, we therefore adopt a management control perspective to critically analyze both quantitative and qualitative empirical ERM research and specifically focus on the integration of ERM in organizational control packages. Taking a complementarity perspective and accounting for the decision-facilitating and decision-influencing purposes of management accounting and control systems (MACS), we recommend several broader avenues for future management accounting research on ERM.","PeriodicalId":46474,"journal":{"name":"Journal of Management Accounting Research","volume":null,"pages":null},"PeriodicalIF":1.7,"publicationDate":"2024-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"139454307","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}
Anna M. Cianci, Bernhard E. Reichert, Karen L. Sedatole, G. Tsakumis
In this study, we show that a supplier’s internal controls (ICs) that lead to either falling short of or to exceeding buyer expectations play an important role in the trust a buyer has in its supplier. In a 12-round repeated trust game, we examine the impact of supplier ICs and the transparency of those ICs to the buyer on buyer trusting behavior across three phases of the buyer-supplier relationship: (1) trust formation, (2) trust violation, and (3) trust repair. We find that, although a supplier’s trust violation reduces buyer trusting behavior, the least amount of damage to trusting behavior occurs for suppliers whose ICs led to supplier actions that fell marginally short of buyer expectations before the violation and when the IC was transparent to the buyer. We refer to this as the IC transparency “immunization effect.” We show that suppliers can benefit from making IC choices known to partners. Data Availability: Contact the authors. JEL Classifications: C91; D91; M41.
{"title":"The Immunization Effect of Internal Control System Transparency following a Supplier’s Violation of Buyer Trust","authors":"Anna M. Cianci, Bernhard E. Reichert, Karen L. Sedatole, G. Tsakumis","doi":"10.2308/jmar-2022-023","DOIUrl":"https://doi.org/10.2308/jmar-2022-023","url":null,"abstract":"\u0000 In this study, we show that a supplier’s internal controls (ICs) that lead to either falling short of or to exceeding buyer expectations play an important role in the trust a buyer has in its supplier. In a 12-round repeated trust game, we examine the impact of supplier ICs and the transparency of those ICs to the buyer on buyer trusting behavior across three phases of the buyer-supplier relationship: (1) trust formation, (2) trust violation, and (3) trust repair. We find that, although a supplier’s trust violation reduces buyer trusting behavior, the least amount of damage to trusting behavior occurs for suppliers whose ICs led to supplier actions that fell marginally short of buyer expectations before the violation and when the IC was transparent to the buyer. We refer to this as the IC transparency “immunization effect.” We show that suppliers can benefit from making IC choices known to partners.\u0000 Data Availability: Contact the authors.\u0000 JEL Classifications: C91; D91; M41.","PeriodicalId":46474,"journal":{"name":"Journal of Management Accounting Research","volume":null,"pages":null},"PeriodicalIF":1.7,"publicationDate":"2023-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"138611630","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}
Robert A. Grasser, Andrew H. Newman, Xiaomei Grazia Xiong
The movement toward pay transparency within firms has intensified. We investigate the effect of horizontal pay transparency on employee motivation in a broader information environment where (1) performance-based and non-performance-based pay dispersion coexist and (2) relative performance information allows employees to alleviate pay dispersion ambiguity in order to assess the basis of any pay dispersion that pay transparency reveals. Drawing on distributive justice theory, we predict and find that pay transparency differentially affects employees’ motivation based on what it reveals about their relative standing while working under the same performance incentives. Specifically, it depends on whether they are underpaid, overpaid, or their relative pay aligns with their relative performance. Our analysis provides additional insights related to these three scenarios, and in doing so, our study highlights the importance of considering employees’ broader information environment when considering the potential benefits and costs associated with pay transparency. Data Availability: Data are available from the authors upon request.
{"title":"The Effect of Horizontal Pay Transparency on Employee Motivation When Pay Dispersion Is Performance Based and Non-Performance Based","authors":"Robert A. Grasser, Andrew H. Newman, Xiaomei Grazia Xiong","doi":"10.2308/jmar-2023-025","DOIUrl":"https://doi.org/10.2308/jmar-2023-025","url":null,"abstract":"\u0000 The movement toward pay transparency within firms has intensified. We investigate the effect of horizontal pay transparency on employee motivation in a broader information environment where (1) performance-based and non-performance-based pay dispersion coexist and (2) relative performance information allows employees to alleviate pay dispersion ambiguity in order to assess the basis of any pay dispersion that pay transparency reveals. Drawing on distributive justice theory, we predict and find that pay transparency differentially affects employees’ motivation based on what it reveals about their relative standing while working under the same performance incentives. Specifically, it depends on whether they are underpaid, overpaid, or their relative pay aligns with their relative performance. Our analysis provides additional insights related to these three scenarios, and in doing so, our study highlights the importance of considering employees’ broader information environment when considering the potential benefits and costs associated with pay transparency.\u0000 Data Availability: Data are available from the authors upon request.","PeriodicalId":46474,"journal":{"name":"Journal of Management Accounting Research","volume":null,"pages":null},"PeriodicalIF":1.7,"publicationDate":"2023-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"138618402","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}
ABSTRACT Although relative performance evaluation (RPE) represents an important compensation practice, selecting a relevant peer firm poses a challenge for compensation committees. We study the implications of a committee’s peer-specific knowledge for the peer group property (i.e., RPE relevance). Committees likely know more about firms within their networks, and such peer-specific knowledge increases with their connections to potential peer firms. Our findings suggest that peer-specific knowledge facilitates not only the inclusion of more relevant peer firms, but also the exclusion of less relevant ones. Moreover, the committees incorporate connected peers’ performance information to a greater extent for risk removal. We address identification challenges by including an intensive set of fixed effects to control for characteristics of the focal and the peer firms and by exploiting exogenous changes to the connections between the committees and the peer firms. Our findings suggest that the compensation committee’s peer-specific knowledge facilitates the RPE practice. Data Availability: All data used in this study are publicly available. JEL Classifications: D22; M52; I19.
{"title":"Peer-Specific Knowledge and Peer Group Properties in Relative Performance Evaluation","authors":"Chung-Yu Hung, Zhenyang Shi","doi":"10.2308/jmar-2022-013","DOIUrl":"https://doi.org/10.2308/jmar-2022-013","url":null,"abstract":"ABSTRACT Although relative performance evaluation (RPE) represents an important compensation practice, selecting a relevant peer firm poses a challenge for compensation committees. We study the implications of a committee’s peer-specific knowledge for the peer group property (i.e., RPE relevance). Committees likely know more about firms within their networks, and such peer-specific knowledge increases with their connections to potential peer firms. Our findings suggest that peer-specific knowledge facilitates not only the inclusion of more relevant peer firms, but also the exclusion of less relevant ones. Moreover, the committees incorporate connected peers’ performance information to a greater extent for risk removal. We address identification challenges by including an intensive set of fixed effects to control for characteristics of the focal and the peer firms and by exploiting exogenous changes to the connections between the committees and the peer firms. Our findings suggest that the compensation committee’s peer-specific knowledge facilitates the RPE practice. Data Availability: All data used in this study are publicly available. JEL Classifications: D22; M52; I19.","PeriodicalId":46474,"journal":{"name":"Journal of Management Accounting Research","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2023-10-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"135963341","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}
Jeremy Douthit, Michael Majerczyk, Lisa McLuckie Thain
ABSTRACT Information asymmetry is fundamental to participative budgeting. Hannan, Rankin, and Towry (2006, “HRT”) develops a nuanced theory regarding the effect of information asymmetry on slack. The authors provide evidence that suggests increasing the precision of a superior’s information system, thereby reducing information asymmetry, can increase slack. We develop a refined version of HRT’s theory by incorporating evidence of how nonpecuniary incentives affect subordinates’ reporting slack from research subsequent to HRT. Our updated theory predicts that slack decreases as information system precision increases, opposite to the results in HRT. To test our refined theory, we replicate HRT’s experiment and find results consistent with our theory. Our results support HRT’s general theory but highlight the importance of establishing regularities of how nonpecuniary incentives affect behavior in accounting. Specifically, our updated theory and new evidence suggest that improving information system precision decreases budgetary slack, contrary to the results suggested in HRT. Data Availability: Data are available from the authors upon request. JEL Classifications: D82; M41; M52.
信息不对称是参与式预算的基础。Hannan, Rankin, and Towry(2006，“HRT”)提出了一个关于信息不对称对懈怠影响的微妙理论。作者提供的证据表明，提高上级信息系统的精确度，从而减少信息不对称，可能会增加懈怠。在HRT之后的研究中，我们通过纳入非金钱激励如何影响下属报告懈怠的证据，开发了HRT理论的改进版本。我们最新的理论预测，随着信息系统精度的提高，松弛会减少，这与HRT的结果相反。为了验证我们完善的理论，我们重复了HRT的实验，并找到了与我们理论一致的结果。我们的研究结果支持HRT的一般理论，但强调了建立非金钱激励如何影响会计行为的规律的重要性。具体而言，我们更新的理论和新的证据表明，提高信息系统精度可以减少预算松弛，这与HRT的结果相反。数据可用性:数据可根据要求从作者处获得。JEL分类:D82;M41;M52。
{"title":"Updated Theory and New Evidence on the Effect of Information System Precision on Managerial Reporting","authors":"Jeremy Douthit, Michael Majerczyk, Lisa McLuckie Thain","doi":"10.2308/jmar-2022-050","DOIUrl":"https://doi.org/10.2308/jmar-2022-050","url":null,"abstract":"ABSTRACT Information asymmetry is fundamental to participative budgeting. Hannan, Rankin, and Towry (2006, “HRT”) develops a nuanced theory regarding the effect of information asymmetry on slack. The authors provide evidence that suggests increasing the precision of a superior’s information system, thereby reducing information asymmetry, can increase slack. We develop a refined version of HRT’s theory by incorporating evidence of how nonpecuniary incentives affect subordinates’ reporting slack from research subsequent to HRT. Our updated theory predicts that slack decreases as information system precision increases, opposite to the results in HRT. To test our refined theory, we replicate HRT’s experiment and find results consistent with our theory. Our results support HRT’s general theory but highlight the importance of establishing regularities of how nonpecuniary incentives affect behavior in accounting. Specifically, our updated theory and new evidence suggest that improving information system precision decreases budgetary slack, contrary to the results suggested in HRT. Data Availability: Data are available from the authors upon request. JEL Classifications: D82; M41; M52.","PeriodicalId":46474,"journal":{"name":"Journal of Management Accounting Research","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2023-10-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"135963015","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}
ABSTRACT This article provides an overview of the papers accepted in the Special Interest Forum of Journal of Management Accounting Research focused on sustainability. The discussion outlines topics and contributions from the selected papers and positions them in relation to prior research and ongoing discussions in the field. Drawing on the “three-legged stool” model that captures the relationships between performance measurement system, incentives, and organizational structure/corporate governance, we suggest potential research avenues on sustainability in management accounting and related fields.
{"title":"Sustainability and Management Accounting Research","authors":"Mandy M. Cheng, Paolo Perego, Naomi S. Soderstrom","doi":"10.2308/jmar-2023-054","DOIUrl":"https://doi.org/10.2308/jmar-2023-054","url":null,"abstract":"ABSTRACT This article provides an overview of the papers accepted in the Special Interest Forum of Journal of Management Accounting Research focused on sustainability. The discussion outlines topics and contributions from the selected papers and positions them in relation to prior research and ongoing discussions in the field. Drawing on the “three-legged stool” model that captures the relationships between performance measurement system, incentives, and organizational structure/corporate governance, we suggest potential research avenues on sustainability in management accounting and related fields.","PeriodicalId":46474,"journal":{"name":"Journal of Management Accounting Research","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2023-10-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"136152736","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 : 2023-10-01DOI: 10.2308/1049-2127-35.3.i
{"title":"Covers and Front Matter","authors":"","doi":"10.2308/1049-2127-35.3.i","DOIUrl":"https://doi.org/10.2308/1049-2127-35.3.i","url":null,"abstract":"","PeriodicalId":46474,"journal":{"name":"Journal of Management Accounting Research","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2023-10-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"136152735","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}
ABSTRACT The theoretical prediction of a negative coefficient on positively correlated peer performance underlies much of the empirical literature on relative performance evaluation. This prediction is commonly obtained from a single period model where the variance–covariance matrix of available performance measures is exogenously restricted to be independent of the evaluee’s action. Using the dynamic approach of Holmström and Milgrom (1987), I study the properties of contracts that optimally condition an agent’s compensation both on his own performance and on how well he fares relative to a peer (group) when these restrictions are not imposed. I show that if the covariance is nonzero, the optimal contract is linear in own and peer performance as well as in their correlation. Significantly, and in line with the preponderance of the empirical evidence, in its simplest and perhaps most reasonable form, the model predicts that the expected coefficient on peer performance is exactly zero.
{"title":"Optimal Dynamic Relative Performance Evaluation","authors":"Thomas Hemmer","doi":"10.2308/jmar-2021-029","DOIUrl":"https://doi.org/10.2308/jmar-2021-029","url":null,"abstract":"ABSTRACT The theoretical prediction of a negative coefficient on positively correlated peer performance underlies much of the empirical literature on relative performance evaluation. This prediction is commonly obtained from a single period model where the variance–covariance matrix of available performance measures is exogenously restricted to be independent of the evaluee’s action. Using the dynamic approach of Holmström and Milgrom (1987), I study the properties of contracts that optimally condition an agent’s compensation both on his own performance and on how well he fares relative to a peer (group) when these restrictions are not imposed. I show that if the covariance is nonzero, the optimal contract is linear in own and peer performance as well as in their correlation. Significantly, and in line with the preponderance of the empirical evidence, in its simplest and perhaps most reasonable form, the model predicts that the expected coefficient on peer performance is exactly zero.","PeriodicalId":46474,"journal":{"name":"Journal of Management Accounting Research","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2023-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"135255108","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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