Skip to main content
SpringerLink
Log in

The Impact of CFOs’ Incentives and Earnings Management Ethics on their Financial Reporting Decisions: The Mediating Role of Moral Disengagement

  • Published:
Journal of Business Ethics Aims and scope Submit manuscript

Abstract

Despite regulatory reforms aimed at inhibiting aggressive financial reporting, earnings management persists and continues to concern practitioners, regulators, and standard setters. To provide insight into this practice and how to mitigate it, we conduct an experiment to examine the impact of two independent variables on CFOs’ discretionary expense accruals. One independent variable, incentive conflict, is manipulated at two levels (present and absent)—i.e., the presence or absence of a personal financial incentive that conflicts with a corporate financial incentive. The other independent variable is CFOs’ earnings management ethics (“EM-Ethics,” high vs. low), measured as their assessment of the ethicalness of key earnings management motivations. We find that incentive conflict and EM-Ethics interact to determine CFOs’ discretionary accruals such that (a) in the presence of incentive conflict, CFOs with low (high) EM-Ethics tend to give into (resist) the personal incentive by booking higher (lower) expense accruals; and (b) in the absence of an incentive conflict, CFOs with low (high) EM-Ethics tend to give into (resist) the corporate incentive by booking lower (higher) expense accruals. We also find support for a mediated-moderation model in which CFOs’ level of EM-Ethics influences their moral disengagement tendencies which, in turn, differentially affect their discretionary accruals, depending on the presence or absence of incentive conflict. Theoretical and practical implications of these findings are discussed.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Fig. 1
Fig. 2

Similar content being viewed by others

Notes

  1. Additionally, extensive prior research on agency theory provides evidence of the conflicting incentives present in the principal–agent relation (e.g., Ettredge et al. 2013; Fischer and Louis 2008; Pierce 2012).

  2. Fixed bonuses are often called “retention” or “stay” bonuses which are used as an incentive to retain key employees (e.g., Phadnis 2013; Scholtes 2009; Smith and Pleven 2009; Lublin 2013). Such bonuses have become increasingly popular (Klaff 2003) with, for example, Yahoo and Starbuck CEOs receiving millions of dollars of such bonuses in recent years (Isidore 2013; Smith 2012).

  3. Bandura (1999) posits that the following eight cognitive mechanisms facilitate unethical behavior: moral justification (reframing unethical acts as being in support of the greater good—e.g., redefining the morality of killing to justify military action), euphemistic labeling (using sanitized language to rename harmful actions and make them appear more benign—e.g., fired employees described as being given a “career alternative enhancement”), advantageous comparison (contrasting the behavior under examination with more reprehensible behavior to make the former seem innocuous—e.g., “The Vietnam war saved the populace from communist enslavement”), displacement of responsibility (attribution of personal responsibility to authority figure[s]—e.g., Nazi prison guards claiming they were just carrying out orders), diffusion of responsibility (attribution of personal responsibility across members of a group—e.g., requiring a group decision to get otherwise considerate people to behave unethically), distortion of consequences (minimizing the seriousness of the effects on one’s actions—e.g., moving a person far away from destructive results to weaken the potential injurious effects on that person), dehumanization (framing the victims of one’s actions as undeserving of basic human consideration—e.g., during wartime, nations casting their enemies as “demons” or “beasts”), and attribution of blame (assigning responsibility to the victims themselves—e.g., computer hackers explaining that they are forced to hack into government databases because of a villainous government).

  4. The results and variables presented in Fig. 1 are discussed in the “Results” section.

  5. We mailed instruments to 1,500 individuals identified by the American Institute of Certified Public Accountants as CFOs/financial officers. We received replies from 113 individuals, and 24 were returned as undeliverable. The resulting response rate is 7.66 % (113 responses divided by 1,476 delivered). This response rate is consistent with prior studies involving CFO participants; for instance, Brav et al. 2008 report a 5.3 % rate; Graham and Harvey 2001, p. 191 report a “nearly 9.0 %” rate; and Graham et al. 2005 report an 8.4 % response rate for their unsolicited survey sample. There were 25 unusable responses: sixteen instruments were completed by inappropriately classified individuals such as staff accountants, clerks, and tax accountants (our conclusions remain the same with or without these individuals), and nine were returned with no response on the dependent variable. Thus, 88 usable responses remained. Five of these respondents were excluded in creating one of our main variables of interest. We discuss this process in more detail below. In addition, comparisons of early and late responders indicate no significant differences, suggesting that nonresponse bias does not drive our results.

  6. Background variables (e.g., familiarity with recording expense accruals, current or prior experience working at a publicly traded company, and years of professional work experience) are not significantly different between conditions. In addition, when we include these variables in our analyses, they are neither significant nor do they alter the conclusions we draw.

  7. The purpose of incorporating a variable bonus into an employment contract is to provide a risk-sharing element between the employer and employee, as well as to increase motivation for the employee to put forth maximum effort (Demski and Feltham 1978; Harris and Raviv 1979). Alternatively, incorporating a fixed bonus into an employment contract provides the employee with relief from assuming the risk for uncontrollable events that may impact the firm’s financial performance. Additionally, s/he will not incur any explicit personal cost for decisions made based on their financial statement impact. Use of a fixed bonus also shifts the agent’s focus from achieving financial targets (i.e., “risk-sharing”) to fulfilling tenure-based targets (i.e., there is a personal cost to the agent of leaving the firm before fixed bonuses are paid).

  8. The Cronbach alpha value exceeds the standard for satisfactory scale reliability (i.e., .70; see Kline 1999; Nunnally and Bernstein 1994). To provide further evidence of our scale’s reliability, we conducted several inter-item correlational analyses (untabulated). All of the inter-item correlations are positive, with 89 % of the inter-item correlations significant at p < .005, 7 % significant at p < .05, and 4 % significant at p ≤ .10. Further, we assessed the split-half reliability of our scale by adopting an odd–even split of our scale, where the odd-numbered items form one score and the even-numbered items form another score (Davidshofer and Murphy 2005). These two scores show a positive correlation of .933 (p = .0001), providing additional support for the reliability of our scale. Finally, the correlations between each scale item and the total EM-Ethics score (i.e., the item-total correlations) are all positive, significant, and above the .30 internal consistency threshold recommended by Nunnally and Bernstein (1994).

  9. Consistent with prior research in accounting (Boylan and Sprinkle 2001) and psychology (Ruwaard et al. 2012; Hutton et al. 2013), we performed our analyses using the ranks of the discretionary expense accrual observations as the dependent variable rather than the reported expense amounts because the reported expense amounts are not normally distributed (which violates one of the assumptions upon which ANOVA and regression are based). Specifically, the Shapiro–Wilk test for normality indicated that the reported expense amounts for each of the four conditions are not normally distributed (all p < .0001). Additionally, as shown in Table 1, the standard deviations of the reported expense amounts are quite high. Accordingly, an ANOVA conducted using a rank transformation of the reported expense amounts is likely to be more efficient (powerful) and theoretically more appropriate than an ANOVA conducted using the actual reported expense amounts (Conover and Iman 1982; Boylan and Sprinkle 2001). Analyses conducted using the actual reported expense amounts yield results that are qualitatively similar to those reported in the paper.

References

  • Al-Khatib, J. A., Rawwas, M. Y. A., & Vitell, S. J. (2004). Organizational ethics in developing countries: A comparative analysis. Journal of Business, 55, 309–322.

    Google Scholar 

  • Arel, B., Beaudoin, C. A., & Cianci, A. M. (2012). The impact of ethical leadership, the internal audit function, and moral intensity on a financial reporting decision. Journal of Business Ethics, 109, 351–366.

    Article  Google Scholar 

  • Ball, R. (2006). International financial reporting standards (IFRS): Pros and cons for investors. Accounting and Business Research, 36, 5–27.

    Article  Google Scholar 

  • Bandura, A. (1986). Social foundation of thought and action: A social cognitive theory. Englewood Cliffs, NJ: Prentice-Hall.

    Google Scholar 

  • Bandura, A. (1990). Mechanisms of moral disengagement. In W. Reich (Ed.), Origins of terrorism: Psychologies, ideologies, theologies, states of mind (pp. 162–191). Cambridge: Cambridge University Press.

    Google Scholar 

  • Bandura, A. (1991). Social cognitive theory of moral thought and action. In W. M. Kurtines & J. L. Gewirtz (Eds.), Handbook of moral behavior and development (Vol. 1, pp. 45–103). Hillsdale, NJ: Erlbaum.

    Google Scholar 

  • Bandura, A. (1999). Moral disengagement in the preparation of inhumanities. Personal and Social Psychology Review, 3, 193–209.

    Article  Google Scholar 

  • Bandura, A. (2002). Selective moral disengagement in the exercise of moral agency. Journal of Moral Education, 31(2), 101–118.

    Article  Google Scholar 

  • Bandura, A., Barbaranelli, C., Caprara, G. V., & Pastorelli, C. (1996). Mechanisms of moral disengagement in the exercise of moral agency. Journal of Personality and Social Psychology, 71, 364–374.

    Article  Google Scholar 

  • Bedard, J., Chtourou, S. M., & Courteau, L. (2004). The effect of audit committee expertise, independence, and activity on aggressive earnings management. Auditing: A Journal of Practice and Theory, 23(2), 13–35.

    Article  Google Scholar 

  • Bergstresser, D., & Philippon, T. (2006). CEO incentives and earnings management. Journal of Financial Economics, 80(3), 511–529.

    Article  Google Scholar 

  • Boylan, S., & Sprinkle, G. (2001). Experimental evidence on the relation between tax rates and compliance: The effect of earned vs. endowed income. Journal of the American Taxation Association, 23, 75–90.

    Article  Google Scholar 

  • Brav, A., Graham, J., Campbell, H., & Michaely, R. (2008). The effect of the May 2003 dividend tax cut on corporate dividend policy: Empirical and survey evidence. National Tax Journal, 61, 381–396.

    Google Scholar 

  • Burns, N., & Kedia, S. (2006). The impact of performance-based compensation on misreporting. Journal of Financial Economics, 79(1), 35–67.

    Article  Google Scholar 

  • Carpenter, T. D., & Reimers, J. L. (2005). Unethical and fraudulent reporting: Applying the theory of planned behavior. Journal of Business Ethics, 60, 115–129.

    Article  Google Scholar 

  • Chambers, D. R., & Lacey, N. J. (1996). Corporate ethics and shareholder wealth maximization. Journal of the Financial Management Association, 6, 93–96.

    Google Scholar 

  • Chang, C. J., & Yen, S. H. (2007). The effects of moral development and adverse selection conditions on managers’ project continuance decisions: A study in the pacific-rim region. Journal of Business Ethics, 76, 347–360.

    Article  Google Scholar 

  • Cheng, Q., & Warfield, T. D. (2005). Equity incentives and earnings management. The Accounting Review, 80(2), 441–476.

    Article  Google Scholar 

  • Chung, R., Firth, M., & Kim, J. B. (2005). Earnings management, surplus free cash flow, and external monitoring. Journal of Business Research, 58, 766–776.

    Article  Google Scholar 

  • Cohen, D. A., Dey, A., & Lys, T. Z. (2008). Real and accrual-based earnings manipulations in the pre- and post- Sarbanes-Oxley periods. The Accounting Review, 83, 757–787.

    Article  Google Scholar 

  • Conover, W. L., & Iman, R. L. (1982). Analysis of covariance using the rank transformation. Biometrics, 38, 715–724.

    Article  Google Scholar 

  • Crocker, K. J., & Slemrod, J. (2007). The economics of earnings manipulation and managerial compensation. RAND Journal of Economics, 38, 698–713.

    Article  Google Scholar 

  • Davidshofer, K. R., & Murphy, C. O. (2005). Psychological testing: Principles and applications (6th ed.). Upper Saddle River, N.J.: Pearson/Prentice Hall.

    Google Scholar 

  • Demski, J. S., & Feltham, G. A. (1978). Economic incentives in budgetary control systems. Accounting Review, 53, 336–359.

    Google Scholar 

  • Dobson, J. (1999). Is shareholder wealth maximization immoral? Financial Analysts Journal, 55, 69–75.

    Article  Google Scholar 

  • Ruwaard J., Lange A., Broeksteeg J., Renteria-Agirre A., Schrieken B., Dolan, C. V., & Emmelkamp P. (2012). Online cognitive behavioural treatment of bulimic symptoms: A randomized controlled trial. Clinical Psychology and Psychotherapy, epub ahead of print. doi: 10.1002/cpp.1767.

  • Dye, R. A. (1988). Earning management in an overlapping generations model. Journal of Accounting Research, 26, 195–235.

    Article  Google Scholar 

  • Eisenhardt, K. M. (1989). Agency theory: An assessment and review. Academy of Management Review, 14, 57–74.

    Google Scholar 

  • Elias, R. (2002). Determinants of earnings management ethics among accountants. Journal of Business Ethics, 40(1), 35–45.

    Article  Google Scholar 

  • Ettredge, M., Huang, Y., & Zhang, W. (2013). Restatement disclosures and management earnings forecasts. Accounting Horizons, 27(2), 347–369.

    Article  Google Scholar 

  • Evans, J. H, III, & Sridhar, S. S. (1996). Multiple control systems, accrual accounting, and earnings management. Journal of Accounting Research, 34, 45–65.

    Article  Google Scholar 

  • Fan, Y., Barua, A., Cready, W. M., & Thomas, W. B. (2010). Managing earnings using classification shifting: Evidence from quarterly special items. The Accounting Review, 85(4), 1303–1323.

    Article  Google Scholar 

  • Fields, T. D., Lys, T. Z., & Vincent, L. (2001). Empirical research on accounting choice. Journal of Accounting and Economics, 31, 255–307.

    Article  Google Scholar 

  • Fischer, P. E., & Louis, H. (2008). Financial reporting and conflicting managerial incentives: The case of management buyouts. Management Science, 54(10), 1700–1714.

    Article  Google Scholar 

  • Fisher, M., & Rosenzweig, K. (1995). Attitudes of students and accounting practitioners concerning the ethical acceptability of earnings management. Journal of Business Ethics, 14, 433–444.

    Article  Google Scholar 

  • Ghosh, D., & Olsen, L. (2009). Environmental uncertainty and managers’ use of discretionary accruals. Accounting, Organizations and Society, 34, 188–205.

    Article  Google Scholar 

  • Graham, J. R., & Harvey, C. R. (2001). The theory and practice of corporate finance: Evidence from the field. Journal of Financial Economics, 60, 187–243.

    Article  Google Scholar 

  • Graham, J. R., Harvey, C. R., & Rajgopal, S. (2005). The economic implications of corporate financial reporting. Journal of Accounting and Economics, 40, 3–73.

    Article  Google Scholar 

  • Graham, J. R., Harvey, C. R., & Rajgopal, S. (2006). Value destruction and financial reporting decisions. Financial Analysts Journal, 62(6), 27–39.

    Article  Google Scholar 

  • Grant, A. M. (2008). Does intrinsic motivation fuel the prosocial fire? Motivational synergy in predicting persistence, performance, and productivity. Journal of Applied Psychology, 93, 48–58.

    Article  Google Scholar 

  • Greenfield, A. C., Norman, C. S., & Wier, B. (2008). The effect of ethical orientation and professional commitment on earnings management behavior. Journal of Business Ethics, 83, 419–434.

    Article  Google Scholar 

  • Guidry, F., Leone, A. J., & Rock, S. (1999). Earnings-based bonus plans and earnings management by business-unit managers. Journal of Accounting and Economics, 26, 113–142.

    Article  Google Scholar 

  • Habib, A., & Hansen, J. C. (2008). Target shooting: Review of earnings management around earnings benchmarks. Journal of Accounting Literature, 27, 25–70.

    Google Scholar 

  • Harris, M., & Raviv, A. (1979). Optimal incentive contracts with imperfect information. Journal of Economic Theory, 20, 23–259.

    Article  Google Scholar 

  • Healy, P. M. (1985). The effect of bonus schemes on accounting decisions. Journal of Accounting and Economics, 7, 85–107.

    Article  Google Scholar 

  • Healy, P. M., & Whalen, J. M. (1999). A review of the earning management literature and its implications for standard setting. Accounting Horizons, 13, 365–383.

    Article  Google Scholar 

  • Holthausen, R. W., Larcker, D. F., & Sloan, R. G. (1995). Annual bonus schemes and the manipulation of earnings. Journal of Accounting and Economics, 19, 29–74.

    Article  Google Scholar 

  • Huang, P., Louwers, T. J., Moffitt, J. S., & Zhang, Y. (2008). Ethical management, corporate governance, and abnormal accruals. Journal of Business Ethics, 83(3), 469–487.

    Article  Google Scholar 

  • Hutton, P., Kelly, J., Lowens, I., Taylor, P. J., & Tai, S. (2013). Self-attacking and self-reassurance in persecutory delusions: A comparison of healthy, depressed and paranoid individuals. Psychiatry Research, 205(1/2), 127–136.

    Article  Google Scholar 

  • Ibrahim, S., & Lloyd, C. (2011). The association between non-financial performance measures in executive compensation contracts and earnings management. Journal of Accounting and Public Policy, 30(3), 256–274.

    Article  Google Scholar 

  • Isidore, C. (2013). Yahoo’s Mayer gets $1.1 million bonus. @CNNMoneyTech March 7.

  • Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3, 305–360.

    Article  Google Scholar 

  • Johnson, E., Fleishman, G., Valentine, S., & Walker, K. (2012). Managers’ ethical evaluations of earnings management and its consequences. Contemporary Accounting Research, 29(3), 910–927.

    Article  Google Scholar 

  • Jones, T. M. (1991). Ethical decision making by individuals in organizations: An issue-contingent model. Academy of Management Review, 2, 366–395.

    Google Scholar 

  • Kaplan, S. (2001). Ethically related judgments by observers of earnings management. Journal of Business Ethics, 32(4), 285–298.

    Article  Google Scholar 

  • Kaplan, S. N., Klebanov, M. M., & Sorensen, M. (2012). Which CEO characteristics and abilities matter? The Journal of Finance, 67(3), 973–1007.

    Article  Google Scholar 

  • Kline, P. (1999). The handbook of psychological testing (2nd ed.). Routledge: London.

    Google Scholar 

  • Krishnan, G. (2003). Does Big 6 auditor industry expertise constrain earnings management? Accounting Horizons, 17, 1–16.

    Article  Google Scholar 

  • Lawton, C. (2007). Dell gets back to basics after audit-panel probe. Wall Street Journal, 250(47), A2.

    Google Scholar 

  • Lee, L. F. (2012). Incentives to inflate reported cash from operations using classification and timing. The Accounting Review, 87(1), 1–33.

    Article  Google Scholar 

  • Levitt, A. (1998). The numbers game. The CPA Journal, 68, 14–19.

    Google Scholar 

  • Levitt, A. (2003). You are the guardians. CFO Magazine, May 1.

  • Lin, B., Lu, R., & Zhang, T. (2012). Tax-induced earnings management in emerging markets: Evidence from china. The Journal of the American Taxation Association, 34(2), 19–44.

    Article  Google Scholar 

  • Loomis, C. J. (1999). Lies, damned lies, and managed earnings. Fortune, 140, 74–92.

    Google Scholar 

  • Lord, A., & DeZoort, F. T. (2001). The impact of commitment and moral reasoning on auditors: Responses to social influence pressure. Accounting, Organizations and Society, 26(3), 215–235.

    Article  Google Scholar 

  • Lublin, J. (2013). CEO pay survey: What’s a CEO worth? More companies answer $10 million. The Wall Street Journal, B1, May 16.

  • MacKinnon, D. P., Lockwood, C. M., Hoffman, J. M., West, S. G., & Sheets, V. (2002). A comparison of methods to test mediation and other intervening variable effects. Psychological Methods, 7, 83–104.

    Article  Google Scholar 

  • Maroney, J. J., & McDevitt, R. E. (2008). The effects of moral reasoning on financial reporting decisions in a post Sarbanes-Oxley environment. Behavioral Research in Accounting, 20, 89–110.

    Article  Google Scholar 

  • Matsunaga, S. R., & Park, C. W. (2001). The effect of missing a quarterly benchmark on the CEO’s annual bonus. The Accounting Review, 76, 313–332.

    Article  Google Scholar 

  • Mayer, D. M., Kuenzi, M., Greenbaum, R., Bardes, M., & Salvador, R. (2009). How low does ethical leadership flow? Test of a trickle-down model. Organizational Behavior and Human Decision Processes, 108, 1–13.

    Article  Google Scholar 

  • McVay, S. E. (2006). Earnings management using classification shifting: An examination of core earnings and special items. The Accounting Review, 81, 501–531.

    Article  Google Scholar 

  • Merchant, K., & Rockness, J. (1994). The morality of managing earnings: An empirical test. Journal of Accounting and Public Policy, 13, 79–94.

    Article  Google Scholar 

  • Mintchik, N. M., & Farmer, T. A. (2009). Associations between epistemological beliefs and moral reasoning: Evidence from accounting. Journal of Business Ethics, 84, 259–275.

    Article  Google Scholar 

  • Moore, C. (2008). Moral disengagement in processes of organizational corruption. Journal of Business Ethics, 80, 129–139.

    Article  Google Scholar 

  • Moore, C., Detert, J. R., Treviño, L. K., Baker, V. L., & Mayer, D. M. (2012). Why employees do bad things: Moral disengagement and unethical organizational behavior. Personnel Psychology, 65, 1–48.

    Article  Google Scholar 

  • Muller, D., Judd, C. M., & Yzerbyt, V. Y. (2005). When moderation is mediated and mediation is moderated. Journal of Personality and Social Psychology, 89, 852–863.

    Article  Google Scholar 

  • Naquin, C. E., Kurtzberg, T. R., & Belkin, L. Y. (2010). The finer points of lying online: E-mail versus pen and paper. Journal of Applied Psychology, 95(2), 387–394.

    Article  Google Scholar 

  • Noronha, C., Zeng, Y., & Vinten, G. (2008). Earnings management in China: An exploratory study. Managerial Auditing Journal, 23, 367–385.

    Article  Google Scholar 

  • Nunnally, J. C., & Bernstein, I. H. (1994). Psychometric theory (3rd ed.). New York, NY: McGraw-Hill.

    Google Scholar 

  • Paciello, M., Fida, R., Tramontano, C., Lupinetti, C., & Caprara, G. V. (2008). Stability and change of moral disengagement and its impact on aggression and violence in late adolescence. Child Development, 79, 1288–1309.

    Article  Google Scholar 

  • Parfet, W. U. (2000). Accounting subjectivity and earnings management: A preparer perspective. Accounting Horizons, 14, 481–488.

    Article  Google Scholar 

  • Phadnis, S. (2013). iGate gives large retention bonuses to top executives. The Economic Times, July 25.

  • Pierce, L. (2012). Organizational structure and the limits of knowledge sharing: Incentive conflict and agency in car leasing. Management Science, 58(6), 1106–1121.

    Article  Google Scholar 

  • Ponemon, L. (1992). Accountant underreporting and moral reasoning: An experimental lab study. Contemporary Accounting Review, 9, 171–189.

    Article  Google Scholar 

  • Ponemon, L. (1995). The objectivity of accountants’ litigation support judgments. Accounting Review, 70(3), 467–488.

    Google Scholar 

  • Rest, J. (1979). Development in judging moral issues. Minneapolis, MN: University of Minnesota Press.

    Google Scholar 

  • Rutledge, R. W., & Karim, K. E. (1999). The influence of self-interest and ethical considerations on managers’ evaluation judgments. Accounting Organization and Society, 24, 173–184.

    Article  Google Scholar 

  • Sarbanes-Oxley Act of 2002. Public Law No. 107–204[H.R.3763]. Washington, D.C.: Government Printing Office.

  • Schipper, K. (1989). Commentary on earnings management. Accounting Horizons, 3, 91–102.

    Google Scholar 

  • Scholtes, S. (2009). Fannie May to pay retention awards. Financial Times, March 19th: 6.

    Google Scholar 

  • Securities and Exchange Commission (SEC). (2008). Final report of the advisory committee on improvements to financial reporting to the United States Securities and Exchange Commission. Available at http://www.sec.gov/about/offices/oca/acifr/acifr-finalreport.pdf

  • Shaw, K. (2003). Corporate disclosure quality, earnings smoothing, and earnings’ timeliness. Journal of Business Research, 56(12), 1043–1050.

    Article  Google Scholar 

  • Shin, S., & Zhou, J. (2007). When is educational specialization heterogeneity related to creativity in research and development teams? Transformational leadership as a moderator. Journal of Applied Psychology, 92, 1709–1721.

    Article  Google Scholar 

  • Smith, A. (2012). Starbucks CEO Schultz made $65 million. @CNNMoney, January 27.

  • Smith, R., & Pleven, L. (2009). US News: Lawyer at center of troubled unit got top bonus. The Wall Street Journal , 253(65), A6.

    Google Scholar 

  • Sweeney, B., Arnold, D., & Pierce, B. (2010). The impact of perceived ethical culture of the firm and demographic variables on auditors’ ethical evaluation and intention to act decisions. Journal of Business Ethics, 93, 531–551.

    Article  Google Scholar 

  • Teoh, S. H., Welch, I., & Wong, T. J. (1998). Earnings management and the long-run market performance of initial public offerings. Journal of Finance, 53, 1935–1974.

    Article  Google Scholar 

  • Treadway Commission. (1987). Report of the national commission on fraudulent financial reporting. Washington, DC: National Commission on Fraudulent Financial Reporting.

  • Treviño, L. K. (1986). Ethical decision making in organizations: A person-situation interactionist model. Academy of Management Review, 11, 601–617.

    Google Scholar 

  • Tweedie, D. (2002). The UK Parliament Select Committee on Treasury. UK: House of Commons.

  • Vinciguerra, B., & O’Reilly-Allen, M. (2004). An examination of factors influencing managers’ and auditors’ assessments of the appropriateness of an accounting treatment and earnings management intentions. American Business Review, 22(1), 78–87.

    Google Scholar 

  • Watts, R. L., & Zimmerman, J. L. (1986). Positive accounting theory. Englewood Cliffs, NJ: Prentice Hall.

    Google Scholar 

  • Xiong, Y., Zhou, H., & Varshney, S. (2010). The economic profitability of pre-IPO earnings management and IPO underperformance. Journal of Economics and Finance, 34(3), 229–256.

    Article  Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Accounting Faculty, School of Business Administration, University of Vermont, Burlington, VT, 05405, USA

    Cathy A. Beaudoin

  2. Accounting Faculty, School of Business, Wake Forest University, Winston Salem, NC, 27109, USA

    Anna M. Cianci

  3. Department of Accounting & MIS, Alfred Lerner College of Business and Economics, University of Delaware, Newark, DE, 19716, USA

    George T. Tsakumis

Authors
  1. Cathy A. Beaudoin
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Anna M. Cianci
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. George T. Tsakumis
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Anna M. Cianci.

Electronic supplementary material

Below is the link to the electronic supplementary material.

Supplementary material 1 (DOC 124 kb)

Appendix

Appendix

Earnings Management Ethics (EM-Ethics) Construct A Items

Rights and permissions

Reprints and permissions

About this article

Cite this article

Beaudoin, C.A., Cianci, A.M. & Tsakumis, G.T. The Impact of CFOs’ Incentives and Earnings Management Ethics on their Financial Reporting Decisions: The Mediating Role of Moral Disengagement. J Bus Ethics 128, 505–518 (2015). https://doi.org/10.1007/s10551-014-2107-x

Download citation

  • Received:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s10551-014-2107-x

Keywords

Search

Navigation