The Role of Trait and State Moral Disengagement on FIN 48 Earnings Management

48 Pages Posted: 8 Oct 2018 Last revised: 29 Feb 2020

See all articles by Ashley West

Ashley West

Kansas State University

Gary Fleischman

Texas Tech University

Date Written: February 27, 2019

Abstract

This behavioral study assesses the influence that dispositional trait and situational state moral disengagement tendencies have on an accounting managers’ willingness to engage in earnings management in the FIN 48 setting. We develop a measure of state moral disengagement so that we can assess the relative influence of both trait and state moral disengagement on opportunistic FIN 48 accruals that are necessary to meet earnings targets. Findings suggest that both trait and state moral disengagement factors significantly influence accounting manager earnings management. We also find noteworthy trait mediation effects that contribute to our understanding of moral disengagement theory. Overall, we find that trait moral disengagement is more salient than state moral disengagement when both factors are included in regression models. Further, we find that more than forty percent of our sample is willing to participate in egregious earnings management that could constitute fraud. We also find that participants with stronger ethical reasoning capabilities are less likely to participate in severe FIN 48 opportunistic behavior. The study contributes to understanding the theoretical boundaries of moral disengagement and how moral disengagement impacts FIN 48 accruals.

Suggested Citation

West, Ashley and Fleischman, Gary, The Role of Trait and State Moral Disengagement on FIN 48 Earnings Management (February 27, 2019). Available at SSRN: https://ssrn.com/abstract=3248378 or http://dx.doi.org/10.2139/ssrn.3248378

Ashley West (Contact Author)

Kansas State University ( email )

109 Calvin Hall
Manhattan, KS 66506-0502
United States

Gary Fleischman

Texas Tech University ( email )

2500 Broadway
Lubbock, TX 79409
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
73
Abstract Views
1,049
rank
366,354
PlumX Metrics