The role of companies’ codes of ethics in mitigating managers’ escalation behavior in the frame of agency theory

Niluh Putu Dian Rosalina Handayani Narsa and Supriyadi

Asia-Pacific Journal of Accounting & Economics, 2019, vol. 26, issue 1-2, 131-149

Abstract: This study examines the role of codes of ethics used to reduce the tendency for managers to irrationally escalate their investment decision commitments, and compares the effectiveness of such codes of ethics in mitigating the escalation of these commitments. Based on 2 (adverse selection and no adverse selection) x 3 (self-certification of code of ethics with signatures, code reading, and no code of ethics) factorial experimental data, the participants in the adverse selection condition tend to escalate more than those who do not. The code of ethics (self-certification of code of ethics with signatures and code reading) is significantly able to mitigate the manager’s escalation behavior. Furthermore, the code certification with signatures is the most effective method to mitigate the escalation of commitment. This study contributes to the literature on the escalation of commitment by providing empirical evidence of effective de-escalation strategies through the organizational ethics aspect.

Date: 2019
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1080/16081625.2019.1546563 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:raaexx:v:26:y:2019:i:1-2:p:131-149

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/raae20

DOI: 10.1080/16081625.2019.1546563

Access Statistics for this article

Asia-Pacific Journal of Accounting & Economics is currently edited by Yin-Wong Cheung, Hong Hwang, Jeong-Bon Kim, Shu-Hsing Li and Suresh Radhakrishnan

More articles in Asia-Pacific Journal of Accounting & Economics from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().