Subcertification and Relationship Quality : Effects on Subordinate Effort

This study considers the decision to impose a control system increasingly seen in practice, subcertification, and the resulting impact on the effort exerted by the controlled individual. I experimentally examine the interaction of subcertification with existing manager-subordinate relationship quality. I draw upon the leader-member exchange (LMX) literature to define relationship quality, providing evidence consistent with subordinates in high quality relationships exerting greater effort to report an accurate accounting estimate than those in low quality relationships. I next consider the effects of the decision to require subcertification on effort, finding that higher quality relationship subordinates decreased effort relative to those not required to subcertify. The results I present are of particular importance to managerial accountants who are charged with control system design and implementation decisions. To the extent that greater effort yields higher quality estimates, this study has financial statement quality implications as well