Heuristics as Effort Reduction Mechanisms in Management Accounting – Some Evidence on Process Characteristics and Pre-Conditions

55 Pages Posted: 29 Nov 2013 Last revised: 3 Dec 2013

Date Written: November 27, 2013

Abstract

The objective of this paper is to provide a fresh look at use of heuristics in management accounting from a process-oriented perspective. In experimental study 1 participants facing an accounting decision mostly ignored advice to decide rationally (e.g. in the sense of strictly following the instructions of the equal weights rule) and instead used heuristics in an ostensibly rational decision task. A detailed process analysis of these heuristics is provided through a verbal protocol analysis in study 2, which showed the typically involved phased strategy. Accountability, as introduced in study 3, is however one external factor that is strongly linked with the use of available cues and departing from (at least reported) non-compensatory rules. Overall, it is suggested that participants facing a management accounting task may not always act according to the laws of (economic) rationality, but under certain circumstances, their decision making can be seen as an adaptive strategy to cope with a complex and uncertain environment. A theoretical framework of this sort of heuristic reasoning in management accounting is suggested, together with possibilities of future research.

Keywords: behavioral accounting, judgment and decision making (JDM) in accounting, rationality, experimental analysis, decision making style, personality, dual process theories, verbal protocols

JEL Classification: M41, M40

Suggested Citation

Basel, Jörn Sebastian, Heuristics as Effort Reduction Mechanisms in Management Accounting – Some Evidence on Process Characteristics and Pre-Conditions (November 27, 2013). Available at SSRN: https://ssrn.com/abstract=2360656 or http://dx.doi.org/10.2139/ssrn.2360656

Jörn Sebastian Basel (Contact Author)

Kalaidos Research Zurich ( email )

Jungholzstr. 43
CH-8050 Zurich
Switzerland

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