The Effect of Long-Term Bonus Frame and Perceived Justification Pressure on Managerial Risk Appetite in a Continuous Monitoring Environment
Speaker
Abstract
| Hunton et al. (2008) observed a functional effect of continuous monitoring (real earnings management was eliminated) and a dysfunctional effect (managerial risk appetite was unduly diminished) in a decision context involving intertemporal investment in an ongoing, risky, viable project. The current study examines two interventions aimed at alleviating the dysfunctional effect of continuous monitoring in this environment while retaining the functional effect. A total of 99 experienced managers took part in a between-participant experiment that manipulated long-term bonus frame (gain or loss) and perceived justification pressure (high or low). The findings indicate that managerial risk appetite increased (decreased) when the long-term bonus was framed as a loss (gain), and when perceived justification pressure was relatively low (high). A significant interaction term suggests that the influence of relatively high and low perceived justification pressure on managerial risk appetite was greater in the loss frame than the gain frame. The findings contribute to theory and practice in the areas of bonus framing, justification and continuous monitoring. |
| Contact information: |
| Paolo Perego |
