Transparency and Biases in Subjective Performance Evaluation

42 Pages Posted: 20 Jan 2022 Last revised: 1 Feb 2022

See all articles by Jan Bouwens

Jan Bouwens

Amsterdam Business School

Christian Hofmann

Ludwig Maximilian University of Munich (LMU) - Faculty of Business Administration (Munich School of Management)

Christopher Lechner

LMU Munich School of Management

Date Written: January 1, 2022

Abstract

One of the major functions of accounting is to report unbiased numbers. In this paper, we demonstrate how favoritism may bias results and also how greater transparency can mitigate this bias. We examine whether one subtle feature of transparency – the physical presence of a stakeholder during the evaluation process – mitigates favoritism biases in subjective evaluations. Using archival data from professional ski jumping, we find that, controlling for objective performance indicators, subjective evaluations suffer from favoritism. In particular, evaluators favor athletes of their own nationality and athletes that have a compatriot on the evaluation panel. We test our transparency hypothesis taking advantage of the situation where, during lockdowns, sports competitions took place without an audience on-site. We predict and provide evidence that the physical presence of an audience during the decision-making process is associated with lower levels of favoritism in subjective evaluations. As such, we contribute to the accounting literature by highlighting how transparency may decrease the likelihood that subjective evaluations are biased by favoritism.

Keywords: Subjective Performance Evaluation, Bias, Favoritism, Transparency, Attendance

JEL Classification: D91, M40, M51, L83, Z20

Suggested Citation

Bouwens, Jan and Hofmann, Christian and Lechner, Christopher, Transparency and Biases in Subjective Performance Evaluation (January 1, 2022). TRR 266 Accounting for Transparency Working Paper Series No. 72, Available at SSRN: https://ssrn.com/abstract=4012905 or http://dx.doi.org/10.2139/ssrn.4012905

Jan Bouwens

Amsterdam Business School ( email )

Roetersstraat 11
Amsterdam, 1018 WB
Netherlands
+31 20 5258740 (Phone)

Christian Hofmann

Ludwig Maximilian University of Munich (LMU) - Faculty of Business Administration (Munich School of Management) ( email )

Kaulbachstr. 45
Munich, DE 80539
Germany

Christopher Lechner (Contact Author)

LMU Munich School of Management ( email )

Institute for Accounting and Control, LMU Munich
Ludwigstr. 28 RG
Munich, 80539
Germany

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