Date of Award
Summer 2018
Document Type
Dissertation
Degree Name
Doctor of Business Administration (DBA)
Department
School of Accountancy
First Advisor
Andrea Drake
Abstract
An ongoing stream of accounting research indicates that non-pecuniary factors significantly affect employees’ reporting behavior. This study investigates the behavioral effects of three non-pecuniary factors - horizontal pay inequity, capacity for budget slack, and severity of peer overstatement. The behaviors of interest are the employees’ level of honesty and whether or not they report a peer that is overstating.
In the experiment, participants acted as division managers who request funding from the owner of a fictitious company to produce certain parts. In each period, participants were paired with a different fictitious peer and were required to make two decisions under a peer reporting system: (1) how much funding to request from the owner to complete the production task, and (2) whether to report their peers, who overstate their funding needs, to the owner. Participants’ total compensation was determined by their own decisions and the decisions made by their peers.
The results suggest that employees are most honest about their funding requests when they are paid more than their peers and are least honest when they are paid less than their peers. Additionally, employees are most likely to blow the whistle on their peers who overstate their funding requests when they are paid less than their peers and are least likely to do so when they are paid the same as their peers. Furthermore, employees tend to create more budget slack when they have greater capacity for overstating their funding requests. Also, employees’ propensity to blow the whistle is positively associated with the severity of their peers’ overstatement.
The results add to the stream of accounting research that integrates both economic and psychological theories to examine employees’ decision making in a multi-agent setting. More importantly, this study makes a contribution by testing the overpayment effect of horizontal inequity in an accounting setting. Also, the results enhance our understanding of the unintentional consequences of implementing a pay transparency policy.
Recommended Citation
Li, Yiwen, "" (2018). Dissertation. 34.
https://digitalcommons.latech.edu/dissertations/34