The Impact of Accounting Contextual Variables on Negotiator's Perceived Risk, Trusting Behavior and Negotiation Outcomes

Abstract:     
We explore how two key aspects of accounting information affect trusting behavior between unknown parties in a bilateral negotiation. The two aspects include the fineness/coarseness of cost information that can be utilized during the negotiation and the profit/loss frame induced by accounting information going into the negotiation. Based on several streams of literature related to trust, we develop a theoretical model of the antecedents and consequences of trusting behavior. Specifically, we provide a model linking accounting contextual variables to perceived risk, trusting behavior, and negotiation outcomes. We conducted an experiment using 148 participants (74 negotiating pairs) to test our hypothesized model. We measured trusting behavior as the negotiator's choice to share or not share private cost information with their negotiating partner. The consequences of trusting behavior include the economic outcome of the negotiation as well as the negotiator's perceived satisfaction with the negotiation process and with the other negotiator. Our main findings demonstrate that accounting information fineness is negatively related to trusting behavior and a loss frame is positively related to trusting behavior. Furthermore, we find significant and positive links between trusting behavior and both economic outcomes and satisfaction with the negotiation process. Overall, our study contributes to the literature by establishing a more comprehensive model of the relationships between aspects of accounting information, risk perceptions, trusting behavior, and negotiation outcomes.

Keywords: trust, negotiation, accounting information characteristics, risk propensity, fineness

Working Paper Series