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HONESTY IN MANAGERIAL REPORTING: IS IT AFFECTED BY PERCEPTIONS OF EQUITY?

MATUSZEWSKI, LINDA JO
http://rave.ohiolink.edu/etdc/view?acc_num=ucin1177333296

Abstract Details

2007, PhD, University of Cincinnati, Business Administration : Accounting.
A growing body of research suggests non-pecuniary preferences for honesty and equity influence behavior in economically significant ways, and managers evaluate decisions by considering how their options relate to the status quo, or reference point. This study examines whether changes in the perceived equity of a manager’s compensation and the decision frame influence the degree to which the manager will misreport accounting information. In an experiment, participants assuming the role of managers had private information about costs and could increase their wealth by reporting dishonestly. Changes in the compensation of the manager or his peers were used to manipulate the relative equity of the manager’s compensation. Three research questions were addressed. (1) Are managers willing to sacrifice wealth to report honestly? (2) Do changes in the equity of a manager’s relative compensation affect the degree of honesty in managerial reporting? (3) Are responses to changes in a manager’s own pay the same as responses to changes in the pay of his peers, and are responses to the introduction of inequity of similar magnitude to responses to the restoration of equity? The results suggest preferences for honesty are economically significant. Changes in compensation which introduced inequity were associated with decreases in honesty, regardless of whether they resulted from a pay increase received by a manager’s peers, or a pay cut received by the manager. However, responses to changes in compensation which restored equity were affected by the decision frame. Honesty increased when equity was restored through a pay raise experienced by the manager; but when a pay cut was given to the manager’s peers, this was not perceived as an increase in the equity of compensation, and the degree of honesty in reporting did not increase. Contrary to predictions, the magnitude of the response to the introduction of inequity was not significantly different than the response to the restoration of equity. These findings suggest attempts to exploit the honesty preferences of managers may be affected by the equity of relative compensation. Furthermore, attempts to mitigate potential losses associated with perceptions of inequitable compensation must address both absolute and relative compensation.
Dr. Andrea Drake (Advisor)
180 p.
Business Administration, Accounting

Recommended Citations

Citations

  • MATUSZEWSKI, L. J. (2007). HONESTY IN MANAGERIAL REPORTING: IS IT AFFECTED BY PERCEPTIONS OF EQUITY? [Doctoral dissertation, University of Cincinnati]. OhioLINK Electronic Theses and Dissertations Center. http://rave.ohiolink.edu/etdc/view?acc_num=ucin1177333296

    APA Style (7th edition)

  • MATUSZEWSKI, LINDA. HONESTY IN MANAGERIAL REPORTING: IS IT AFFECTED BY PERCEPTIONS OF EQUITY? 2007. University of Cincinnati, Doctoral dissertation. OhioLINK Electronic Theses and Dissertations Center, http://rave.ohiolink.edu/etdc/view?acc_num=ucin1177333296.

    MLA Style (8th edition)

  • MATUSZEWSKI, LINDA. "HONESTY IN MANAGERIAL REPORTING: IS IT AFFECTED BY PERCEPTIONS OF EQUITY?" Doctoral dissertation, University of Cincinnati, 2007. http://rave.ohiolink.edu/etdc/view?acc_num=ucin1177333296

    Chicago Manual of Style (17th edition)

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© 2007, all rights reserved.
This open access ETD is published by University of Cincinnati and OhioLINK.