The Effect of Relative Performance Information and the Perception of Other Employee Behavior on Noncompliance
50 Pages Posted: 30 Nov 2015 Last revised: 12 Dec 2017
Date Written: December 1, 2017
This study investigates how relative performance information (RPI) and the perception of other employee noncompliant behavior affect an employee’s own noncompliance when employees have individual incentives for noncompliance. We vary the presence of RPI (present vs. absent), the level of noncompliant behavior of other employees (high vs. low), and the presence of a formal control (present vs. absent). In the absence of a formal control, we find that noncompliance decreases when an employee perceives high levels of other employees’ noncompliant behavior versus low levels. We argue that this is because employees wish to distance themselves from more salient others’ noncompliant behavior. Moreover, we provide evidence that the provision of RPI increases noncompliance when an employee perceives high levels of other employees’ noncompliant behavior but does not affect noncompliance in the presence of low levels of noncompliant behavior of other employees. We attribute this finding to the group frame created by RPI and its inherent externalities. Finally, we show that psychological considerations triggered by RPI and other employees’ noncompliance become less important when a control is present. Overall, our study informs accountants about the effects of RPI, an important performance evaluation system, on the critical aspect of noncompliance.
Keywords: Relative performance information, social norms, working hours rules
JEL Classification: M41
Suggested Citation: Suggested Citation