How Effective Are Social Norm Interventions in Corporations? Evidence from a Laboratory Experiment on Earnings Misrepresentation
66 Pages Posted: 30 Jan 2015 Last revised: 29 Mar 2017
Date Written: March 24, 2017
Social norms can act as safeguards against corporate misconduct, but can also foster undesirable behavior. To study differences in individual resistance to social norms, we conduct a laboratory experiment on misrepresentation of earnings. There are systematic differences among individuals' reactions to social norms approving or disapproving of misrepresentation. Specifically, individuals with strong preferences for truthfulness react less to both kinds of social norms. These findings have implications for the empirical and theoretical analysis of managerial behavior and for the use of social norms as steering tools for corporate governance.
Keywords: Behavioral finance, corporate governance, earnings misrepresentation, honesty, laboratory experiments, social finance, social norm interventions
JEL Classification: G02, G30, C91, M14
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