Management Accounting Section Midyear Meeting

Asymmetric Adjustment of Control

• In Event: Control Systems IV

Abstract

Some principals use controls because they believe agents are more self-interested than they actually are in the absence of controls. In this study, I predict that principals reinforce such a belief through their experience with controlling agents. Consistent with this prediction, the results of my experiment show that principals are more reluctant to decrease their control over agents than increase their control over agents when I provide them with a monetary incentive to adjust their control at a given point in time. Further analysis also reveals that this asymmetric adjustment pattern of control disappears when principals have less time to reinforce and more time to revise their belief that agents are self-interested before and after I incentivize them to decrease their control over agents. My study contributes to the control literature by showing that experience with controls may lead to a "control creep," where controls progressively get stronger over time.

Author

• Victor van Pelt, WHU - Otto Beisheim School of Management