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Human bias in the oversight of firms: evidence from workplace safety violations

Author

Listed:
  • Jonas Heese

    (Harvard Business School)

  • Gerardo Pérez-Cavazos

    (UCSD Rady School of Management)

  • Andreya Pérez-Silva

    (UCSD Rady School of Management)

Abstract

We study the effects of mood as a source of human bias on regulators’ oversight and enforcement decisions. We use weather at facilities at the time of an OSHA inspection to proxy for the OSHA compliance officers’ mood. We find that, during periods of good mood due to sunny weather, the number of workplace safety violations and dollar penalties assessed by the officer decrease. These effects are more pronounced when OSHA officers have more discretion. In turn, the effect of mood on oversight and enforcement decisions can be mitigated by increased monitoring by the regional OSHA office. Furthermore, our results suggest that there is a slightly higher incidence of workplace accidents after “good mood” inspections. Overall our findings show that regulators’ mood results in bias in the oversight of firms.

Suggested Citation

  • Jonas Heese & Gerardo Pérez-Cavazos & Andreya Pérez-Silva, 2024. "Human bias in the oversight of firms: evidence from workplace safety violations," Review of Accounting Studies, Springer, vol. 29(4), pages 3413-3448, December.
    • Handle: RePEc:spr:reaccs:v:29:y:2024:i:4:d:10.1007_s11142-023-09807-3
    DOI: 10.1007/s11142-023-09807-3
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    More about this item

    Keywords

    Enforcement; Regulation; Human bias; Workplace safety inspections; Environmental; Social and corporate Governance (ESG);
    All these keywords.

    JEL classification:

    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • M48 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Government Policy and Regulation
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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