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Causal Attribution, Benefits Sharing, and Earnings Management*

Lukas Helikum Orcid Logo, Hun‐Tong Tan, Tu Xu

Contemporary Accounting Research, Volume: 39, Issue: 2, Pages: 893 - 916

Swansea University Author: Lukas Helikum Orcid Logo

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Abstract

We conduct two experiments to investigate the joint effect of two justification factors of earnings management—namely, attribution for the firm's underperformance and benefits accruing to other employees from inflating reported earnings. This investigation is important because prior research ex...

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Published in: Contemporary Accounting Research
ISSN: 0823-9150 1911-3846
Published: Wiley 2022
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URI: https://cronfa.swan.ac.uk/Record/cronfa64538
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spelling v2 64538 2023-09-13 Causal Attribution, Benefits Sharing, and Earnings Management* b4dd73821ce17c52521386cd177395bb 0000-0002-9392-6165 Lukas Helikum Lukas Helikum true false 2023-09-13 BAF We conduct two experiments to investigate the joint effect of two justification factors of earnings management—namely, attribution for the firm's underperformance and benefits accruing to other employees from inflating reported earnings. This investigation is important because prior research examines the effects of individual justification factors, whereas real-world settings entail more complexity involving multiple justification factors. In Experiment 1, we predict and find that managers are more likely to manage earnings when the firm's underperformance is caused by an external event and misreported earnings benefit other employees besides the reporting manager. Furthermore, we show that the extent to which participants use moral justifications mediates the effect of benefits sharing on earnings management, but only when causal attribution is external, and that it mediates the effect of causal attribution on earnings management, but only when benefits are shared. In Experiment 2, we use a neutral control condition that makes no mention of inconsistent incentives to demonstrate that it is the combination of causal attribution and benefits sharing that triggers earnings management. We contribute to the accounting and psychology literature by proposing and testing a theory that explains how multiple justification factors interact to cause opportunistic behavior. Our results suggest that policy-makers and governing parties should consider developing a holistic view of possible justification factors, focusing on situational opportunities created by combinations of factors rather than individual factors alone. Journal Article Contemporary Accounting Research 39 2 893 916 Wiley 0823-9150 1911-3846 Earnings management, causal attribution, benefits sharing, justifiability, fairness, attribution causale, équité, gestion des résultats, justifiabilié, partage des bénéfices 1 6 2022 2022-06-01 10.1111/1911-3846.12755 http://dx.doi.org/10.1111/1911-3846.12755 COLLEGE NANME Accounting and Finance COLLEGE CODE BAF Swansea University 2023-10-04T11:26:48.9556570 2023-09-13T14:48:06.6086457 Faculty of Humanities and Social Sciences School of Management - Accounting and Finance Lukas Helikum 0000-0002-9392-6165 1 Hun‐Tong Tan 2 Tu Xu 3
title Causal Attribution, Benefits Sharing, and Earnings Management*
spellingShingle Causal Attribution, Benefits Sharing, and Earnings Management*
Lukas Helikum
title_short Causal Attribution, Benefits Sharing, and Earnings Management*
title_full Causal Attribution, Benefits Sharing, and Earnings Management*
title_fullStr Causal Attribution, Benefits Sharing, and Earnings Management*
title_full_unstemmed Causal Attribution, Benefits Sharing, and Earnings Management*
title_sort Causal Attribution, Benefits Sharing, and Earnings Management*
author_id_str_mv b4dd73821ce17c52521386cd177395bb
author_id_fullname_str_mv b4dd73821ce17c52521386cd177395bb_***_Lukas Helikum
author Lukas Helikum
author2 Lukas Helikum
Hun‐Tong Tan
Tu Xu
format Journal article
container_title Contemporary Accounting Research
container_volume 39
container_issue 2
container_start_page 893
publishDate 2022
institution Swansea University
issn 0823-9150
1911-3846
doi_str_mv 10.1111/1911-3846.12755
publisher Wiley
college_str Faculty of Humanities and Social Sciences
hierarchytype
hierarchy_top_id facultyofhumanitiesandsocialsciences
hierarchy_top_title Faculty of Humanities and Social Sciences
hierarchy_parent_id facultyofhumanitiesandsocialsciences
hierarchy_parent_title Faculty of Humanities and Social Sciences
department_str School of Management - Accounting and Finance{{{_:::_}}}Faculty of Humanities and Social Sciences{{{_:::_}}}School of Management - Accounting and Finance
url http://dx.doi.org/10.1111/1911-3846.12755
document_store_str 0
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description We conduct two experiments to investigate the joint effect of two justification factors of earnings management—namely, attribution for the firm's underperformance and benefits accruing to other employees from inflating reported earnings. This investigation is important because prior research examines the effects of individual justification factors, whereas real-world settings entail more complexity involving multiple justification factors. In Experiment 1, we predict and find that managers are more likely to manage earnings when the firm's underperformance is caused by an external event and misreported earnings benefit other employees besides the reporting manager. Furthermore, we show that the extent to which participants use moral justifications mediates the effect of benefits sharing on earnings management, but only when causal attribution is external, and that it mediates the effect of causal attribution on earnings management, but only when benefits are shared. In Experiment 2, we use a neutral control condition that makes no mention of inconsistent incentives to demonstrate that it is the combination of causal attribution and benefits sharing that triggers earnings management. We contribute to the accounting and psychology literature by proposing and testing a theory that explains how multiple justification factors interact to cause opportunistic behavior. Our results suggest that policy-makers and governing parties should consider developing a holistic view of possible justification factors, focusing on situational opportunities created by combinations of factors rather than individual factors alone.
published_date 2022-06-01T11:26:50Z
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