The Influence of Framing and Agent's Mindset on Effort Allocation Decision

This study examined how the combination of an accounting measure and its target number influenced effort allocation decisions. By using an experimental method, we indicated that a positive frame of a task presentation (combination of the accounting measure and its target number) increases managers' confidence in successfully executing the task, and the frame process leads managers to take higher risks through having confidence in their effort allocation decision. Our research suggests that managers determine effort allocation among tasks based not on probability, but on confidence, and the degree of confidence is not necessarily equal to the estimated probability of success. Moreover, we found that the combination of the accounting measure and its target number had increased or decreased the framing effect. Our findings suggest that we may need to pay more attention to the combination of the accounting measure and its target number when designing compensation contracts