Honesty and Management Control System Design: An Experimental Study

Maria.J. Sanchez-Exposito () and David Naranjo-Gil ()
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Maria.J. Sanchez-Exposito: Department of Financial Economics and Accounting, Pablo de Olavide University, Seville, Spain
David Naranjo-Gil: Department of Financial Economics and Accounting, Pablo de Olavide University, Seville, Spain

No 12.05, Working Papers from Universidad Pablo de Olavide, Department of Financial Economics and Accounting (former Department of Business Administration)

Abstract: The manipulation of performance measures is a central theme in management accounting research. Individuals have private information that can be used for their own benefit; and thus they can falsify their performance reporting. Psychology literature asserts that the attitude of individuals to maximize their own interests or common benefits depends on their cognitive orientation. Accounting literature argues that management control systems can motivate individuals to act for the organization benefit. This paper analyzes how management control systems (beliefs system vs. boundary system) and cognitive orientation of individuals affect honesty in performance reporting. Hypotheses were tested using an experiment among post-graduate students. Results showed that a boundary design of management control systems moderates the negative relationship between the individualist cognitive orientation and the honesty in performance reporting.

Keywords: Honesty; management control system design and cognitive orientation (search for similar items in EconPapers)
Pages: 34 pages
Date: 2012-07
New Economics Papers: this item is included in nep-exp and nep-neu
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Persistent link: https://EconPapers.repec.org/RePEc:pab:fiecac:12.05

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