Group management accounting critique assignment
Description: Students will be required to critique a management accounting research article including providing a summary of the article and critically examining the article's strengths and weaknesses including validity and significance of findings.
The title of the article to be critiqued is as follows:
Blay, A., Douthit, J. & Fulmer, B XXXXXXXXXXWhy don't people Lie? Negative affect intensity and preferences for honesty in budgetary reporting. Management Accounting Research. 42: 56-65.
The maximum word limit for the assignment is 1,500 words (not including reference list).
Additional information about the assignment including a link to the article will be provided on UCLean (Canvas).
Formation of assignment groups and submission of assignments
Students will be required to select an assignment group using the group selection activity on UCLearn (Canvas). The maximum group size is restricted to 3 students. Group selection will open on Monday 9th September 2019 at 9am. Students are required to submit their completed assignments to the assignment drop box on UCLearn (Canvas). Only one member of each group is required to submit the assignment on behalf of the group,
Assignment Marking Criteria
The group article critique assignment will be assessed on the following basis:
20% Summary of article objective, research method and findings
60% Critical examination of the article's strengths and weaknesses (including validity and significance with evidence from the article that will allow the reader to make value judgments about the article).
20% Effective communication and referencing
Note that a detailed marking guide will be available on the Learn Online (Moodle) site.
Late Submission of Assignments
Late submission of the assignment will attract a penalty of 5% per day late. Please see section 5b of the unit outline for further information on penalties for late submission of assignments and grounds for extensions.
Why don't people lie? Negative affect intensity and preferences for honesty in budgetary reporting
Contents lists available at ScienceDirect
Management Accounting Research
journal homepage: www.elsevier.com/locate/ma
Why don't people lie? Negative affect intensity and preferences for honesty
in budgetary reporting
Allen Blaya, Jeremy Douthitb,⁎, Bachman Fulmer IIIc
a College of Business, Florida State University, 821 Academic Way, Tallahassee, FL, 32306, USA
Eller College of Management, University of Arizona, 1130 E. Helen St., Tucson, AZ, 85721, USA
c Sykes College of Business, The University of Tampa, 401 W. Kennedy Blvd., Tampa, FL, 33606, USA
A R T I C L E I N F O
Keywords:
Participative budgeting
Honesty
Affect
A B S T R A C T
Budgets are instrumental in management control systems but are prone to gaming behavior that creates slack
and limits the effectiveness of budgets. Research suggests, however, that subordinates have preferences fo
adhering to a social norm of honesty that limits slack in their budgetary reporting. As such, an increased un-
derstanding of subordinates’ preferences for honesty can improve participative budgeting systems. We develop
and test theory that increases our understanding of the drivers of preferences for honesty. We test the theory that
preferences for honesty originate from an individual’s desire to avoid negative affect from violating social norms.
Further, individuals systematically differ in the intensity with which they experience their negative affective
eactions. Those with higher levels of this intensity (negative affect intensity, NAI), experience more negative
affect and disutility from violating a norm of honesty. Thus, NAI is predictive of subordinates’ preference fo
honesty. Experimental results support our theory. Budgetary slack is constrained by preferences for honesty and
NAI increases preferences for honesty. As such, preferences for honesty are a stronger informal control fo
subordinates with higher NAI. We discuss the implications of our theory for contract design and job assignment.
1. Introduction
Participative budgeting can improve firms’ planning and control if
subordinates convey some of their private information (Li
y and
Lindsay, XXXXXXXXXXHowever, subordinates benefit from misreporting. Re-
search on misreporting in participative budgeting suggests that sub-
ordinate preferences for adhering to an honesty norm (“preferences fo
honesty”)1 reduce budgetary slack and firms can benefit from under-
standing these preferences for honesty (Demski and Feltham, 1978;
Mittendorf, 2006; Rankin et al., 2008; Douthit and Stevens, XXXXXXXXXXOu
theory increases our understanding of why preferences for honesty exist
and predicts which subordinates have stronger preferences for honesty.
Specifically, we test whether the trait intensity with which one ex-
periences negative affective reactions predicts their preferences fo
honesty.
Subordinates trade off their preferences for honesty and wealth
when reporting (Luft, 1997; Evans et al., 2001; Brüggen and Luft, 2011)
and individuals differ in the strength of their preferences for honesty
(Murphy, XXXXXXXXXXWe argue that preferences for honesty arise from ne-
gative affect. Subordinates create slack by misreporting, but this
diverges from a social norm of honesty. Diverging from a social norm
triggers a negative affective reaction (Damasio, XXXXXXXXXXIndividuals are
negative affect-averse and anticipate affect when making decisions
(Rivis et al., XXXXXXXXXXThe desire to avoid expected negative affect from
violating a norm of honesty causes subordinates to exhibit preferences
for honesty. As such, the more intensely one experiences their negative
affective reactions (negative affect intensity, “NAI”), the stronger thei
preferences for honesty. Importantly, individuals possess a stable trait
level of NAI (Larsen, XXXXXXXXXXIndividuals with higher NAI experience
greater negative affect from diverging from a norm of honesty. In turn,
this increases the utility from adhering to a norm of honesty, holding
preferences for wealth constant, and increases preferences for honesty.
Thus, we predict that NAI is a key driver of subordinate preferences fo
honesty.
Several factors could reduce the influence of NAI on preferences fo
honesty. First, our theory assumes that honesty is a social norm in
participative budgeting. If not, there can be no affective reaction to
diverging from a norm of honesty and, thus, no preferences for honesty
from NAI. While some argue that creating slack is a behavioral norm
(Jensen, 2001) and preferences for honesty may not be salient (Rankin
https:
doi.org/10.1016/j.mar XXXXXXXXXX
Received 1 August 2016; Received in revised form 11 May 2018; Accepted 15 May 2018
⁎ Co
esponding author.
E-mail addresses: XXXXXXXXXX (A. Blay), XXXXXXXXXX (J. Douthit), XXXXXXXXXX (B. Fulmer).
1 These preferences are the intrinsic desire to avoid false factual assertions (Rankin et al., 2008).
2 NAI does not capture how easily an individual has an affective reaction, but how strong a given reaction will be.
Management Accounting Research XXXXXXXXXX–65
Available online 30 May 2018
XXXXXXXXXX/ © 2018 Elsevier Ltd. All rights reserved.
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www.sciencedirect.com/science/journal/ XXXXXXXXXX
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www.elsevier.com/locate/ma
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doi.org/10.1016/j.mar XXXXXXXXXX
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doi.org/10.1016/j.mar XXXXXXXXXX
mailto: XXXXXXXXXX
mailto: XXXXXXXXXX
mailto: XXXXXXXXXX
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doi.org/10.1016/j.mar XXXXXXXXXX
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crossmark.crossref.org/dialog/?doi=10.1016/j.mar XXXXXXXXXX&domain=pdf
et al., 2008), the extant literature argues that preferences for honesty
are important (Brown et al., XXXXXXXXXXSecond, our theory assumes that
individuals can anticipate the intensity of their affective reaction from
diverging from a norm of honesty. However, individuals sometimes can
e
when predicting their affect intensity (Gilbert and Wilson, 2007)
and such affective forecasting e
ors would potentially mute the effect
of NAI on preferences for honesty. Finally, negative affect can have
many sources, including losses of wealth (Kermer et al., XXXXXXXXXXTo the
extent that individuals view foregoing slack as a loss of wealth, it is
possible that not misreporting could also cause negative affect and limit
NAI’s predictive ability. However, this argument ignores the implicit
property rights in the participative budgeting setting (Douthit and
Majerczyk, XXXXXXXXXX
We test our theory with an incentivized experiment where we
measure NAI using the Affect Intensity Measure psychometric inventory
(Larsen et al., 1986) prior to a participative budgeting task. In the
udgeting task, the subordinate privately learns the actual cost and
eports a budget to the firm. The subordinate keeps any slack, creating
strong incentives to misreport. When the budget is a cost report, pre-
ferences for honesty restrict how much slack the subordinate creates.
However, other intrinsic preferences, such as for fairness, also affect
misreporting (Salterio and We
, 2006; Brown et al., 2009), making
slack a noisy proxy for the effect of preferences for honesty. Thus, we
capture the incremental effect of preferences for honesty by manip-
ulating whether the budget communication requires a factual assertion
of the cost or does not require a factual assertion (offers a share of
profits). While residual motivations operate in both settings, slack
creation requires an explicit false assertion of fact when the budget
equires a factual assertion but not when it takes the form of a profit
offer. Thus, as in prior research, the difference in slack between treat-
ments captures the effect of preferences for honesty incremental to
other concerns (Rankin et al., 2008; Douthit and Stevens, 2015).
Results support our theory. A subordinate’s NAI is predictive of thei
preferences for honesty. Relatedly, in the setting where preferences fo
honesty are relevant, a subordinate’s NAI increases their self-reported
desire to be honest. Further, we use our theory of why preferences fo
honesty exist to examine the effectiveness of preferences for honesty as
an informal control. For subordinates with high (low) NAI, preferences
for honesty are an effective (ineffective) control that yields highe
(lower) firm profit than that expected from a formal hurdle rate (Antle
and Eppen, XXXXXXXXXXAs a whole, our results suggest that avoiding nega-
tive affect is the genesis of preferences for honesty and NAI can
therefore predict the strength of preferences for honesty. Our results
suggest that understanding the relative NAI of a subordinate population
is important to firms when deciding whether to rely on formal or in-
formal controls and supports claims that understanding preferences fo
honesty can improve contracting (e.g., Mittendorf, 2006).
Our study makes several contributions. We peer into the “black box”
of why subordinates have preferences for honesty by investigating one
source of such preferences – to avoid negative affect from norm di-
vergence – capitalizing on a strength of experiments (Luft, XXXXXXXXXXWe
provide a strong test of our theory by using an ex ante measure of NAI
to predict preferences for honesty. We also extend trade-offmodels used
to explain slack creation (e.g., Luft, 1997) by examining a factor that
explains why preferences for honesty exist and predicts their magni-
tude. Further, we extend a pair of financial misreporting studies which
argue that anticipated negative affect drives preferences for honesty
(Murphy, 2012; Mayhew and Murphy, XXXXXXXXXXThey find that partici-
pants experience “residual negative affect following an unethical act (p.
424),” which demonstrates that dishonesty can lead to negative affect.4
We extend this research by directly testing the causal mechanism
theorized to drive preferences for honesty, answering a call in Mayhew
and Murphy (p. 439)