Subordinate Independence and Accounting Bias


Speaker


Abstract

Employees facing managers motivated to 'manage' financial reports can affect reporting quality by cooperating with the manager. Independence is likely a key determinant of whether the subordinate complies with manager's requests. We use the leader member exchange to define independence between subordinates and managers. We propose that less independent subordinates will provide more biased information when requested to do so.  We also propose that the greatest impact of low independence occurs when the manager requests an income-increasing estimate. Results from an experiment show that less independent subordinates introduce greater bias in estimates, but more so for income increasing requests.  These findings provide an understanding of the determinants of subordinates' decisions to constrain manager opportunism. Further, counter to the existing literature our result show potential negative consequences of high-quality relationships between subordinates and managers. 
 
Contact information:
Sandra van de Pas
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