Why are People Honest? Internal and External Motivations to Report Honestly

Abstract

We create and validate measures capturing internal and external motivations to report honestly as individual differences. Both measures have high levels of reliability, as well as convergent and divergent validity. To test their predictive validity, we conduct two experiments. In the first, MTurk participants have the opportunity and incentive to misreport with no immediate consequences, and in the second, participants with management experience report how they would act in a similar business context. We find that participants who are higher in internal motivations to report honestly are, indeed, more likely to report honestly than others. Partial evidence supports that people higher in external motivations report more honestly when we introduce management controls. We also provide evidence of unintended consequences; people who are higher in internal motivations actually misreport more under certain controls than they do absent those controls, consistent with self-determination theory. Results should be of interest to management and those charged with governance or oversight within an organization. Our measures are also useful to researchers investigating honest reporting by allowing them to identify, ex ante, individuals who wish to be honest versus appear honest.

Keywords: honesty, misreporting, scale development, experiment

JEL Classification: M41