In Search of Informed Discretion (Revisited): Are Managers Concerned about Appearing Selfish?

42 Pages Posted: 12 Jan 2021 Last revised: 6 May 2022

See all articles by Bart Dierynck

Bart Dierynck

Tilburg University

Jesse van der Geest

Tilburg University

Victor van Pelt

WHU - Otto Beisheim School of Management

Date Written: May 6, 2022

Abstract

To improve the quality of performance evaluation and compensation decisions, managers can undertake costly searches for additional information. Prior management accounting research has found that managers are willing to undertake these costly information searches and has explained this finding through managers’ social preferences (i.e., distributional fairness and reciprocity). Our experimental study finds evidence for a more refined explanation of managers’ willingness to obtain costly additional information. Specifically, our results show that managers are significantly less willing to undertake costly information searches when offered a separate opt-out option for the costly information acquisition process. Our findings are consistent with insights from behavioral economics and social psychology, suggesting that even self-interested people exhibit prosocial behavior because the situation in which they find themselves triggers concerns about appearing selfish to themselves and others. We discuss how creating working conditions that increase managers’ concerns about their self-image may prompt them to make informed performance evaluation and compensation decisions.

Keywords: managerial discretion; discretionary bonus pool; incentive contracting; reciprocity; fairness; trust; third-party intervention

JEL Classification: C92, D91, M40, M41

Suggested Citation

Dierynck, Bart and van der Geest, Jesse and van Pelt, Victor, In Search of Informed Discretion (Revisited): Are Managers Concerned about Appearing Selfish? (May 6, 2022). Available at SSRN: https://ssrn.com/abstract=3736930 or http://dx.doi.org/10.2139/ssrn.3736930

Bart Dierynck (Contact Author)

Tilburg University ( email )

P.O. Box 90153
Tilburg, DC Noord-Brabant 5000 LE
Netherlands

Jesse Van der Geest

Tilburg University ( email )

P.O. Box 90153
Tilburg, DC Noord-Brabant 5000 LE
Netherlands

Victor Van Pelt

WHU - Otto Beisheim School of Management ( email )

Burgplatz 2
Vallendar, 56179
Germany

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