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Honesty and Management Control System Design: An Experimental Study


  • Maria J. Sanchez-Exposito

    () (Department of Financial Economics and Accounting, Pablo de Olavide University, Seville, Spain)

  • David Naranjo-Gil

    () (Department of Financial Economics and Accounting, Pablo de Olavide University, Seville, Spain)


The manipulation of performance measures is a central theme in management accounting research. Individuals have private information that can be used for their own benefit; and thus they can falsify their performance reporting. Psychology literature asserts that the attitude of individuals to maximize their own interests or common benefits depends on their cognitive orientation. Accounting literature argues that management control systems can motivate individuals to act for the organization benefit. This paper analyzes how management control systems (beliefs system vs. boundary system) and cognitive orientation of individuals affect honesty in performance reporting. Hypotheses were tested using an experiment among post-graduate students. Results showed that a boundary design of management control systems moderates the negative relationship between the individualist cognitive orientation and the honesty in performance reporting.

Suggested Citation

  • Maria J. Sanchez-Exposito & David Naranjo-Gil, 2012. "Honesty and Management Control System Design: An Experimental Study," Working Papers 12.05, Universidad Pablo de Olavide, Department of Financial Economics and Accounting (former Department of Business Administration).
  • Handle: RePEc:pab:fiecac:12.05

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    References listed on IDEAS

    1. Uri Gneezy, 2005. "Deception: The Role of Consequences," American Economic Review, American Economic Association, vol. 95(1), pages 384-394, March.
    2. Widener, Sally K., 2007. "An empirical analysis of the levers of control framework," Accounting, Organizations and Society, Elsevier, vol. 32(7-8), pages 757-788.
    3. Burgstahler, David & Dichev, Ilia, 1997. "Earnings management to avoid earnings decreases and losses," Journal of Accounting and Economics, Elsevier, vol. 24(1), pages 99-126, December.
    4. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer;Economic Science Association, vol. 10(2), pages 171-178, June.
    5. Rigdon, Mary, 2009. "Trust and reciprocity in incentive contracting," Journal of Economic Behavior & Organization, Elsevier, vol. 70(1-2), pages 93-105, May.
    6. Henri, Jean-Francois, 2006. "Management control systems and strategy: A resource-based perspective," Accounting, Organizations and Society, Elsevier, vol. 31(6), pages 529-558, August.
    7. Naranjo-Gil, David & Hartmann, Frank, 2007. "Management accounting systems, top management team heterogeneity and strategic change," Accounting, Organizations and Society, Elsevier, vol. 32(7-8), pages 735-756.
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    Honesty; management control system design and cognitive orientation;

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