Various motivations for managerial (mis)reporting – an experimental study

Abstract

In the experiment we model all possible consequences from misreporting for both the shareholder and for the manager, since we are interested in patterns in reporting behaviour resulting from different motivations for potential misrepresentation. This allows for examining the stability of the (mis)reporting behaviour in different treatments. Agents are primarily driven by the consequences for themselves rather than by the consequences for the principal, while deciding on misreporting. Participants are willing to sacrifice a small gain for themselves in order to prevent a greater loss for the principal. If agents misreport, they do it in order to generate positive rather than negative consequences for themselves. Reports in favour of the principal, but fruitless or even costly for the agent are very rare. The experiment indicates also that pro-social agents report more truthfully than pro-self agents.

Keywords:

• Reporting behaviour
• honesty
• social value orientation
• integrity
• truth vs. optimization

AMS Subject Classifications:

• A13
• D82
• D03

Acknowledgements

We would like to thank Reinhard Selten for helpful comments and feedback during creation of the design of the experiment.

Notes

No potential conflict of interest was reported by the authors.