The Joint Effects of Supervisor Pay Transparency and Vertical Pay Dispersion on Reporting Honesty

Journal of Management Accounting Research, Forthcoming

35 Pages Posted: 10 Jan 2020 Last revised: 13 Apr 2020

See all articles by Xiaotao Kelvin Liu

Xiaotao Kelvin Liu

Northeastern University - Accounting Group

Yu Tian

University of Central Florida - Kenneth G. Dixon School of Accounting

Yue May Zhang

Northeastern University - Accounting Group

Date Written: December 3, 2019

Abstract

We investigate how supervisor pay transparency interacts with vertical pay dispersion to affect subordinates’ reporting honesty in a budgeting setting. As predicted, results from our experiment suggest that the effect of supervisor pay transparency relative to secrecy on reporting honesty becomes more negative (more positive) as vertical pay dispersion becomes higher (lower). Our findings suggest that supervisor pay transparency complements an egalitarian pay structure by increasing reporting honesty, whereas it does not fare along with high vertical pay dispersion by decreasing reporting honesty. Further investigation suggests that this result is not necessarily driven by the feeling of unfairness towards high supervisor pay, but by a benchmarking effect (i.e., subordinates use supervisor pay as a pay standard and try to find ways to earn a similar amount).

Keywords: pay secrecy, pay transparency, vertical pay dispersion, budgeting, reporting honesty

Suggested Citation

Liu, Xiaotao Kelvin and Tian, Yu and Zhang, Yue May, The Joint Effects of Supervisor Pay Transparency and Vertical Pay Dispersion on Reporting Honesty (December 3, 2019). Journal of Management Accounting Research, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3507531 or http://dx.doi.org/10.2139/ssrn.3507531

Xiaotao Kelvin Liu (Contact Author)

Northeastern University - Accounting Group ( email )

404B Hayden Hall
360 Huntington Avenue
Boston, MA 02115
United States
617-373-5926 (Phone)

Yu Tian

University of Central Florida - Kenneth G. Dixon School of Accounting ( email )

University of Central Florida
P.O. Box 161400
Orlando, FL 32816-1400
United States
(407) 823-2966 (Phone)
(407) 823-3881 (Fax)

Yue May Zhang

Northeastern University - Accounting Group ( email )

360 Huntington Ave.
Boston, MA 02115
United States

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