ABSTRACT: Using an experiment, I examine whether involvement in scorecard implementation can mitigate the effects of motivated reasoning that occur when is framed as a causal chain rather than merely balanced set measures. Psychological research on suggests managers will evaluate and interpret data ways consistent with preferences, increasing their tendency to arrive at conclusions are desired (Kunda 1990). Consistent research, results my study show who involved selecting strategic...

Research in behavioral economics suggests that, addition to their traditional incentive effects, formal control systems can influence psychological motivations. We extend this literature by demonstrating experimentally that controls directly people's sense of what behaviors are appropriate the setting (personal norms), and indirectly alter tendency conform behavior those around them (descriptive norms). These effects persist even after changed, so current be strongly influenced past...

ABSTRACT To facilitate managers' decision-making, firms develop strategic performance measurement systems that translate strategy into measures. Ideally, managers see measures for what they are—imperfect proxies intangible constructs. However, may fail to fully appreciate the fact are merely representations of constructs, and act as though construct interest—a phenomenon we label surrogation. In this paper, investigate whether how use strategically linked compensation purposes affects...

ABSTRACT Strategic performance measurement systems operationalize firm strategy with a set of measures. A consequence such alignment is the tendency for managers to lose sight strategic construct(s) measures are intended represent, and subsequently act as though constructs interest, phenomenon referred surrogation . We investigate how involvement in selection affects managers’ propensity exhibit surrogation. predict find that reduces Surprisingly, we do not engaging deliberation, key process...

Prior research provides evidence that information affects financial statement users' judgments less when is provided in a accessible format (e.g., disclosed footnote or prominent rather than being recognized on the income [Maines and McDaniel 2000]). We provide that, conditional users performing analysis necessary to transform statements appear as if had been recognized, may affect more it would have initially. Our experiments are set context of constructive capitalization operating leases....

ABSTRACT We report the results of three experiments based on model Hong and Stein (1999) . Consistent with model, show that when informed traders do not observe prices, uninformed generate long‐term price reversals by engaging in momentum trade. However, also contrarian trading. The suggest a dominated information set is sufficient to account for behavior observed among individual investors, may be responsible but play little role driving short‐term momentum.

We conduct two experiments to examine potential causes of the disposition effect. In Experiment 1, we rule out beliefs in mean reversion as a cause Although belief stock prices should be independent whether an investor owns or only follows stock, show investors who own behave though will reverse. 2, participants buy and sell securities over multiple periods. find that self-regard investing confidence (two types self-esteem) have opposing influences on investors' tendency hold losing...

Research in behavioral economics suggests that addition to their traditional incentive effects, formal control systems can influence psychological motivations. We extend this literature by demonstrating experimentally controls directly people’s sense of what behaviors are appropriate the setting (personal norms), and indirectly alter tendency conform behavior those around them (descriptive norms). These effects persist even after changed, so current be strongly influenced past strength. Our...

Journal Article Margin Trading, Overpricing, and Synchronization Risk Get access Sanjeev Bhojraj, Bhojraj Send correspondence to at Cornell University, SC. Johnson Graduate School of Management, Ithaca, NY 14853, telephone: (607) 255-4069, or email: sb235@cornell.edu; Robert J. Bloomfield SC 255-9407, rjb9@cornell.edu; William B. Tayler can be reached Emory Goizueta Business School, 1300 Clifton Road NE, Atlanta, Georgia 30322, (404) 727-2362, email william_tayler@bus.emory.edu. Search for...

This paper uses an experiment to examine whether involvement in scorecard implementation can mitigate the effects of motivated reasoning that occur when is framed as a causal chain rather than merely balanced set measures. Psychological research on suggests managers will evaluate and interpret data ways consistent with their preferences, increasing tendency arrive at conclusions are desired (Kunda 1990). Consistent research, results my study show who involved selecting strategic initiatives...

SYNOPSIS Previous research finds that individuals place more weight on information when they choose to obtain it than acquire the same without explicit choice. We examine whether litigation risk and auditor experience influence auditors' susceptibility choice effect, which has potential implications for audit effectiveness efficiency. In our experiment, auditors evaluate likelihood of an inventory obsolescence issue a hypothetical client. find in high setting, less experienced exhibit...

ABSTRACT Prior research finds that controls induce cooperation among collaborators on a project increase trust, and this increased trust increases subsequent collaborators. We extend work by investigating how influence cooperative behavior in two settings. The first is an interactive setting where people together can benefit from each other's work. second non‐interactive do not directly but be observed. propose because are likely to engender greater reciprocity settings than settings, the...

To facilitate managers’ decision-making, firms develop strategic performance measurement systems that translate strategy into measures. Ideally, managers see measures for what they are: imperfect proxies intangible constructs. However, may fail to fully appreciate the fact are merely representations of constructs, and act as though were construct interest – a phenomenon we label surrogation. In this paper, investigate whether how use strategically-linked compensation purposes affects...

Michael J. DiStefano, PhD; Jenny M. Markell, BA; Caroline C. Doherty, MHS; G. Caleb Alexander, MD; Gerard F. Anderson, PhD

SYNOPSIS This study investigates how formal control systems and the behavior of peers influence in accounting settings with imperfect controls. We manipulate controls social norms a laboratory experiment, allowing us to precisely investigate interactive effect these two factors on behavior. provide evidence that when initial are strong subsequently weakened, individuals behave more self-interested manner subsequent than who setting where weak strengthened. also conform conflict changes...

ABSTRACT Measurement is a fundamental part of accounting. A primary purpose measurement to provide more concrete representations abstract strategic objectives. potential consequence using measures proxy for less-tangible constructs the tendency managers fall prey surrogation, losing sight and behaving as though are interest. We show that surrogation nonconscious process. also extend understanding conditions necessary occur by showing mere awareness (even absent compensation) sufficient...

A central feature of most organizations is the use measures to represent key elements performance across multiple strategic objectives. Prior research demonstrates a tendency for individuals treat these as though they are higher order objectives were intended opposed imperfect representations those objectives—a phenomenon labeled “surrogation.” We employ an experiment further understand this phenomenon. In study, we capture neural activation when processing and find that, in regions brain...

We report the results of three experiments based on model Hong and Stein (1999). Consistent with model, show that when informed traders do not observe prices, uninformed generate long-term price reversals by engaging in momentum trade. However, also contrarian trading. Results suggest a dominated information set is sufficient to account for behavior observed among individual investors, may be responsible but play little role driving short-term momentum.

Prior research provides evidence that financial-statement users weight information less heavily in judgment when is provided a accessible format (e.g., disclosed footnote or important financial statement rather than being recognized on the income (Maines and McDaniel 2000)). We provide that, conditional performing analysis necessary to transform statements appear as if had been recognized, may more it would have recognized. Our experiments are set context of constructive capitalization...

Strategic performance measurement systems operationalize firm strategy with a set of measures. A consequence such alignment is the tendency for managers to lose sight strategic construct(s) measures are intended represent, and subsequently act as though constructs interest, phenomenon referred surrogation. We investigate how involvement in selection affects managers’ propensity exhibit predict find that reduces Surprisingly, we do not engaging deliberation, key process underlying selection,...

Employees often perform tasks with multiple dimensions. In this study, we examine how employees' performance on multidimensional differs under different control structures. We conduct two experiments in which manipulate the presence of compensation controls and feedback task Our findings suggest that when employees are compensated dimensions they commit to goals divide their attention among those However, implemented one dimension another dimension, can improve individual as well overall...

We investigate whether the weights managers place on multiple performance measures for purpose of determining performance-contingent pay depend are determined before or after employees exert effort. propose that, while overall these (to guide toward desired actions) is unaltered by timing, frame weighting decision differently depending timing. Specifically, prior to employee effort, as one intended motivate effort in line with firm objectives. After evaluate a way that can be justified fair....