Managerial Proclivities to Financially Misreport

68 Pages Posted: 2 Jul 2019

See all articles by Suneal Bedi

Suneal Bedi

Indiana University - Kelley School of Business

Catherine M. Schrand

University of Pennsylvania - Accounting Department

Eugene F. Soltes

Harvard Business School

Date Written: June 29, 2019

Abstract

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.

Suggested Citation

Bedi, Suneal and Schrand, Catherine M. and Soltes, Eugene F., Managerial Proclivities to Financially Misreport (June 29, 2019). Kelley School of Business Research Paper No. 19-34. Available at SSRN: https://ssrn.com/abstract=3412137 or http://dx.doi.org/10.2139/ssrn.3412137

Suneal Bedi

Indiana University - Kelley School of Business ( email )

1309 East Tenth Street
Indianapolis, IN 47405-1701
United States

Catherine M. Schrand

University of Pennsylvania - Accounting Department ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States
215-898-6798 (Phone)
215-573-2054 (Fax)

Eugene F. Soltes (Contact Author)

Harvard Business School ( email )

Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States

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