Vertical Pay Dispersion, Peer Observability and Misreporting.

• In Event: Employee Interactions in Management Accounting

Abstract

In this study, we examine the interactive effect of vertical pay dispersion and peer observability on reporting behaviors. We use a budgetary setting to examine the interaction between members of superior-subordinate triads (two subordinates paired with each superior) in the presence of both vertical pay dispersion (high/low) and peer observability (present/absent). As predicted, we find that peer observability shapes subordinate’s misreporting behaviors differently based on different levels of vertical pay dispersion. Specifically, we find that when peer reports are observable, subordinates are influenced to a greater degree by reporting choices of peers who are more (vs. less) honest than themselves when vertical pay dispersion is low (vs. high). Thus, when vertical pay dispersion is low, subordinate misreporting is lower when subordinates can observe their peer’s reporting decisions than when they cannot. However, when vertical pay dispersion is high, subordinates misreport more when their peer’s reports are observable than when they cannot. Implications for theory and practice are discussed.

Authors

• Lan Guo, Wilfrid Laurier University

• Theresa A Libby, University of Waterloo

• Xiaotao (Kelvin) Liu, Northeastern University

• Yu Tian, University of Central Florida