Management Accounting Section Midyear Meeting

Socially Oriented Misreporting in Mission-Driven Firms

• In Event: Social Responsibility

Abstract

In this paper, we use a sample of social mission-oriented firms in Korea to examine the factors that influence social performance misreporting. We find that CEOs’ mission orientation is positively associated with overreporting of social performance, indicating that incentives to expand the social mission with more funding (benevolence channel) dominate the managers’ self-concept of honesty (honesty channel). Moreover, we document that when the main beneficiary of social bonuses is expected to be a firm’s employees (firm’s mission), mission-oriented managers are less (more) likely to engage in social misreporting, indicating that the honesty channel (benevolence channel) dominates in such a setting. We also show that mission-oriented managers are more likely to engage in social misreporting in situations of financial distress, suggesting that the benevolence channel prevails over the honesty channel in these cases. Lastly, we demonstrate that while a CEO-centered decision-making process increases managers’ social misreporting, strong corporate governance can deter such behavior.

Authors

• Gwan-Hee Kim, Seoul National University

• Jae Yong Shin, Seoul National University

• Sun-Moon Jung, Seoul National University