Moral commitment: Does it reduce or enhance the response to social norms? Evidence from an experiment on earnings management

61 Pages Posted: 30 Jan 2015 Last revised: 9 Apr 2021

See all articles by Rajna Gibson

Rajna Gibson

University of Geneva - Geneva Finance Research Institute (GFRI); European Corporate Governance Institute (ECGI)

Carmen Tanner

University of Zurich - Department of Banking and Finance

Alexander F. Wagner

University of Zurich - Department of Banking and Finance; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI); Swiss Finance Institute

Date Written: March 24, 2021

Abstract

Social norms play a powerful role in guiding managerial behavior. For example, prior work has established the power of injunctive (prescriptive) norms in areas where views on what is right and wrong widely differ, such as earnings management (EM). Existing work highlights the effects of social norms on the average norm addressee. However, little is known about individual differences in reactions to injunctive norms. That is, who is more malleable, and who resists more? In this research, we conduct an experiment on EM to study such potential differences in individual responses to social norms. We find that participants with a strong commitment to honesty react less to both EM-disapproving and EM-approving injunctive norms. These findings have implications for the theoretical and empirical analysis of managerial behavior and for the use of injunctive social norms as steering tools for truthful reporting.

Keywords: Behavioral finance, corporate governance, earnings misrepresentation, honesty, laboratory experiments, social finance, social norm interventions

JEL Classification: G02, G30, C91, M14

Suggested Citation

Gibson, Rajna and Tanner, Carmen and Wagner, Alexander F., Moral commitment: Does it reduce or enhance the response to social norms? Evidence from an experiment on earnings management (March 24, 2021). Swiss Finance Institute Research Paper No. 15-01, Available at SSRN: https://ssrn.com/abstract=2557480 or http://dx.doi.org/10.2139/ssrn.2557480

Rajna Gibson (Contact Author)

University of Geneva - Geneva Finance Research Institute (GFRI) ( email )

40 Boulevard du Pont d'Arve
Geneva 4, Geneva 1211
Switzerland
+41.22.379.89.83 (Phone)

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Carmen Tanner

University of Zurich - Department of Banking and Finance ( email )

CH-8032 Zurich
Switzerland

Alexander F. Wagner

University of Zurich - Department of Banking and Finance ( email )

Plattenstrasse 14
Z├╝rich, 8032
Switzerland
+41 44 634 3963 (Phone)

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Swiss Finance Institute ( email )

Switzerland

HOME PAGE: http://www.alex-wagner.com

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