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

See all articles by Corinna Ewelt-Knauer

Corinna Ewelt-Knauer

University of Muenster

Thorsten Knauer

Ruhr Universität Bochum

David J. Sharp

University of Western Ontario - Managerial Accounting and Control Area Group

Date Written: December 1, 2017

Abstract

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

Ewelt-Knauer, Corinna and Knauer, Thorsten and Sharp, David J., The Effect of Relative Performance Information and the Perception of Other Employee Behavior on Noncompliance (December 1, 2017). Available at SSRN: https://ssrn.com/abstract=2696613 or http://dx.doi.org/10.2139/ssrn.2696613

Corinna Ewelt-Knauer

University of Muenster ( email )

Schlossplatz 2
Muenster, D-48149
Germany

Thorsten Knauer (Contact Author)

Ruhr Universität 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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