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Delegation of Decision Rights and Misreporting: The Roles of Incentive-based Compensation Schemes and Responsibility Rationalization

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  • Vincent K. Chong
  • Isabel Z. Wang

Abstract

Our paper examines when and how the delegation of decision rights and incentive-based compensation schemes (two organizational-design choices) and responsibility rationalization affect managers’ misreporting behavior. One hundred and twenty-nine managers from manufacturing firms in the US completed an online survey. Our results suggest that managers’ responsibility rationalization moderates the relationships between the delegation of decision rights and misreporting, and incentive-based compensation schemes and misreporting. Despite our results providing no evidence of a simple mediating role of incentive-based compensation schemes on the relationship between the delegation of decision rights and misreporting, we find support for a moderated-mediation effect. Specifically, our results demonstrate that the indirect effect of the delegation of decision rights on misreporting via incentive-based compensation schemes is conditional on managers’ responsibility rationalization. The theoretical and practical implications of our findings are discussed.

Suggested Citation

  • Vincent K. Chong & Isabel Z. Wang, 2019. "Delegation of Decision Rights and Misreporting: The Roles of Incentive-based Compensation Schemes and Responsibility Rationalization," European Accounting Review, Taylor & Francis Journals, vol. 28(2), pages 275-307, March.
    • Handle: RePEc:taf:euract:v:28:y:2019:i:2:p:275-307
    DOI: 10.1080/09638180.2018.1452771
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    Cited by:

    1. Muhammad Irdam Ferdiansah & Vincent K. Chong & Isabel Z. Wang & David R. Woodliff, 2023. "The Effect of Ethical Commitment Reminder and Reciprocity in the Workplace on Misreporting," Journal of Business Ethics, Springer, vol. 186(2), pages 325-345, August.
    2. Lisa-Marie Wibbeke & Maik Lachmann, 2020. "Psychology in management accounting and control research: an overview of the recent literature," Journal of Management Control: Zeitschrift für Planung und Unternehmenssteuerung, Springer, vol. 31(3), pages 275-328, September.
    3. Thuy‐Van Tran & Janne Järvinen, 2022. "Understanding the concept of subjectivity in performance evaluation and its effects on perceived procedural justice across contexts," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 62(3), pages 4079-4108, September.

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