Goal-setting is a common practice to motivate effort. However, little is known about the effectiveness of group goal difficulty on shirking depends on team dynamics, such as group identity. We study the question under a mixed incentives setting where a combination of a tournament incentive and a...

This study uses a budgeting experiment to examine the effects of peer influence and firm earnings position on managerial honesty. In the experiment, participants report production costs to request funds from the firm based on their actual private cost information. The firm’s earnings position...

Psychological contracts represent unofficial or informal expectations that an individual holds, most commonly applied to an employer–employee relationship. Understanding psychological contracts helps explain the consequences of unmet expectations, including increased budgetary slack and...

Interfirm relationships can be successful but are also fraught with problems. We study how to encourage one party, herein the seller, to make a cooperative relation-specific investment that will increase the joint surplus. The seller, fearing he will be held up by the buyer, typically refrains...

A challenge faced by many firms is how to encourage managers to undertake risk levels that are compatible with overall firm performance goals. Incentive compensation that is tied to financial returns is a common control mechanism that is meant to induce managers to strive for higher returns...

We explore how two key aspects of accounting information affect trusting behavior between unknown parties in a bilateral negotiation. The two aspects include the fineness/coarseness of cost information that can be utilized during the negotiation and the profit/loss frame induced by accounting...