The Effect of Relative Performance Information, Peers’ Rule-breaking, and Controls on Employees’ own Rule-breaking

Forthcoming, European Accounting Review

33 Pages Posted: 30 Nov 2015 Last revised: 19 Mar 2020

See all articles by Corinna Ewelt-Knauer

Corinna Ewelt-Knauer

University of Münster

Thorsten Knauer

Ruhr University of Bochum

David J. Sharp

University of Western Ontario - Managerial Accounting and Control Area Group

Date Written: March 17, 2020

Abstract

This study investigates how relative performance information (RPI) and peers’ rule-breaking affect an employee’s own rule-breaking in both the absence and presence of weak formal controls. We vary the presence of RPI (absent vs. present), the level of peers’ rule-breaking (low vs. high), and the presence of weak formal controls (absent vs. present). We find that in the absence of formal controls, RPI provision increases an employee’s rule-breaking when he/she perceives that his/her peers’ rule-breaking is high but not when his/her peers’ rule-breaking is low. We attribute this finding to the increased importance of the behavior of others when RPI is present. Further, we provide evidence that the presence of weak formal controls increases rule-breaking relative to no controls. We argue that such controls alter employees’ perception of the context and induce a more calculative focus on the economic benefits than the costs, while ethical motivations are crowded out. Finally, we show that ethical considerations triggered by RPI in situations of low levels of peers’ rule-breaking become less important when weak controls are present. Overall, this study informs accountants about the effects of RPI, a crucial performance evaluation system, on the critical aspect of rule-breaking.

Keywords: Relative performance information, social norms, working hours rules

JEL Classification: M41

Suggested Citation

Ewelt-Knauer, Corinna and Knauer, Thorsten and Sharp, David J., The Effect of Relative Performance Information, Peers’ Rule-breaking, and Controls on Employees’ own Rule-breaking (March 17, 2020). Forthcoming, European Accounting Review, Available at SSRN: https://ssrn.com/abstract=2696613 or http://dx.doi.org/10.2139/ssrn.2696613

Corinna Ewelt-Knauer

University of Münster ( email )

Schlossplatz 2
Muenster, D-48149
Germany

Thorsten Knauer (Contact Author)

Ruhr University of Bochum ( email )

Universitätsstraße 150
Bochum, NRW 44801
Germany

HOME PAGE: http://www.wiwi.ruhr-uni-bochum.de/con/

David J. Sharp

University of Western Ontario - Managerial Accounting and Control Area Group ( email )

London, Ontario
Canada
519-661-3945 (Phone)
519-661-3485 (Fax)

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