Beliefs About Accountants' Risk Tendencies and Their Effect on the Integration of Accountants' Advice Regarding Expenditure Decisions

34 Pages Posted: 30 Jul 2007

See all articles by W. Timothy Mitchell

W. Timothy Mitchell

University of Massachusetts - Isenberg School of Management

Sean A. Peffer

University of Kentucky - Gatton College of Business and Economics

Date Written: July 2007

Abstract

We investigate whether stereotypes of accountants' risk preferences influence how managers integrate accountants' advice into their decisions. One key role of accountants is to provide advice that facilitates business managers' decision making. Standards of accounting call for accountants to provide objective advice, and accountants believe their role is to provide objective advice. However, stereotypes of accountants as risk averse can lead managers to treat accountants' advice as not objective and, thus, lead to biased integration of accountants' advice into managers' decisions. The results of our three experiments indicate that people believe accountants are more risk averse than general business people. This belief leads to expectations that accountants are more likely to recommend reducing rather than increasing expenditures when risk is present. As a result, decision makers integrate less (more) of accountants' advice when accountants recommend decreasing (increasing) expenditures. This is the first study to demonstrate that a commonly held belief about accountants affects how decision makers respond to information accountants provide. Accountants who realize this can take steps to ensure unbiased integration of their advice into managers' decisions.

Keywords: Advice, Decision Making, Objective, Risk

JEL Classification: M40, M46, G31

Suggested Citation

Mitchell, William Timothy and Peffer, Sean, Beliefs About Accountants' Risk Tendencies and Their Effect on the Integration of Accountants' Advice Regarding Expenditure Decisions (July 2007). AAA 2008 MAS Meeting Paper. Available at SSRN: https://ssrn.com/abstract=1003395 or http://dx.doi.org/10.2139/ssrn.1003395

William Timothy Mitchell (Contact Author)

University of Massachusetts - Isenberg School of Management ( email )

Amherst, MA 01003-4910
United States
4135750012 (Phone)
4135453858 (Fax)

Sean Peffer

University of Kentucky - Gatton College of Business and Economics ( email )

550 South Limestone
Lexington, KY 40506
United States
606-257-3149 (Phone)
606-257-3654 (Fax)

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