Managerial Proclivities to Financially Misreport
68 Pages Posted: 2 Jul 2019
Date Written: June 29, 2019
We use an experimental survey that includes five financial (mis)reporting scenarios to investigate why managers consider engaging in financial misreporting. In our sample of over 400 experienced managers, we find nearly 60% of managers stating they would likely misreport in at least one of the scenarios. We find that morality and culture — as expressed by both social and professional norms — are the most significant drivers that either enable or inhibit a manager’s stated willingness to misreport. We find little consistent evidence that greater legal sanctions reduce managers’ proclivities to misreport. To the extent we find significant results for managerial attributes and sanctions, they occur in the scenarios that describe an extremely acceptable action or extremely unacceptable action, as assessed in a pretest. Our analysis highlights some of the challenges in designing effective regulatory and organizational strategies to prevent malfeasance.
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