Exploring Contagion in Budgetary Misreporting

• In Event: Budgeting

Abstract

This study investigates the effect of internal reporting transparency on managerial misreporting behavior. We focus on a setting in which an organization has an established belief system indicating behaviors (e.g., honest reporting) that are valued by the organization. We hypothesize and find that misreporting is greater in open reporting environments compared to in closed reporting environments. Further, the negative effect of open reporting environments on misreporting behavior is greater with low organizational identification compared to high organizational identification. Our findings provide valuable insight into how the internal reporting environment and the level of organizational identification jointly affect managerial reporting behavior. Thus, we provide further insight into how organizational factors, including the presence of others, influence reporting behavior. Our study has important implications for practice given many organizations’ move towards more open, transparent environments and greater investment in building organizational identification.

Authors

• Jeremy Lill, University of Kansas

• Michael John Majerczyk, Georgia State University

• Ke Xu, Georgia State University