Cognitive Determinants of Aggressive Financial Reporting – The Combined Effects of Ego Depletion, Moral Identity, and an Ethical Intervention

We experimentally investigate the combined effects of ego depletion, moral identity, and ethical interventions on managers’ financial reporting aggressiveness in the development of an accounting estimate. We find that decision makers with high moral identity become more aggressive later in the day (once they become ego depleted), but those with low moral identity do not. We also find that an ethical intervention has a significant influence on the reporting judgments of depleted decision makers with low moral identity, but not on the judgments of depleted decision makers with high moral identity. However, the opposite effect occurs when decision makers are not depleted. That is, an ethical intervention has a significant influence on the financial reporting judgments of undepleted decision makers with high moral identity, but not on the judgments of undepleted decision makers with low moral identity. Supplemental analyses reveal different patterns of decision makers’ cognitive dissonance across experimental conditions