Managers’ presentation preferences for aggregation: the role of internal reporting outcome, purpose, and Machiavellianism

ABSTRACT

We focus on a flexible internal reporting setting and conduct an experiment to examine profit centre managers’ presentation preferences for aggregation when reporting performance-target deviations to superiors. Managers can use the internal reporting flexibility as an informational tactic to manage superiors’ perceptions of managers’ performance in ways that are consistent with mental accounting predictions. We examine if profit centre managers’ presentation preferences for aggregation depend on the internal reporting outcome and purpose as well as their level of Machiavellianism. Results show that profit centre managers’ presentation preferences for aggregation when reporting mixed outcomes are consistent with mental accounting predictions. We also find that profit centre managers’ use of impression management strategies is consistent with mental accounting predictions when the internal reporting purpose is for target revision and when high Machiavellians are reporting a mixed gain. Our results have implications for organisations in their decision to include stronger and more formalised control and governance mechanisms in order to inhibit profit centre managers’ use of internal report to influence superiors’ perceptions.

KEYWORDS:

• Internal reporting flexibility
• impression management
• mental accounting
• performance evaluation
• target-revision
• Machiavellianism

JEL CODES:

• D90
• M21
• M41
• C91

Acknowledgments

We appreciate helpful comments and suggestions from participants of the 2020 Management Accounting in Latin America Workshop, 2019 Annual Conference of the Brazilian National Association of Graduate Programs in Accounting, 2019 Brazilian Behavioral Economics and Finance Meeting, and 2019 EIASM Conference on Performance Measurement and Management Control. This research was partially funded by the Coordenação de Aperfeiçoamento de Pessoal de Nível Superior (CAPES).

Disclosure statement

No potential conflict of interest was reported by the author(s).

Supplementary material

Supplemental data for this article can be accessed here

Notes

1. Detailed information regarding the AMT Participation Agreement can be found at https://www.mturk.com/participation-agreement.

2. While this procedure prevent participants from understanding the manipulations and the purposes of the research, there still remain the possibility of AMT participants accessing the research instrument through multiple Virtual Private Servers with different IP addresses (Dennis et al., 2020).

3. Monetary values presented at the internal reports follow Bonner et al. (2014).

4. Pearson correlations of the questions about the desirability and advantageousness for aggregation preference = 0.84 and disaggregation = 0.78, p < 0.01.

5. None of the participants indicate similar level of presentation preference for the two internal reporting formats.

6. For example, if a participant indicates that the aggregated format is 90 in the desirable scale and 80 in the advantageous scale, the aggregation preference is 85. Considering a disaggregation preference of 75, the composite measure is 10. We then add 100 to the composite measure so that our final measure is 110.

7. Our main results remain the same if we decide not to remove the participants that failed the manipulation check, except the significance level for H2 drops to 0.05 (one-tailed).

8. The operational definition of impression management as participants’ confidence/belief that superiors will use the internal reporting for either giving them a good evaluation (performance evaluation) or adjusting downward next-year targets (target revision) is consistent with the definition of impression management as the purposive attempt to control superiors’ impressions (Hooghiemstra, 2000; Leary & Kowalski, 1990). Precisely, the operationalisation of intention to engage in impression management in this study is capturing profit centre managers’ intention to use internal reporting flexibility as a self-promotion strategy to obtain desirable outcomes (Bolino & Turnley, 1999).

Additional information

Funding

This work was supported by the Coordenação de Aperfeiçoamento de Pessoal de Nível Superior (CAPES Foundation/PROEX/PDEE).