Skip to main content

Hubris and Unethical Decision Making: The Tragedy of the Uncommon

Abstract

The research theorizes how hubris impacts ethical decision making and develops empirical evidence that earnings manipulation is more likely at firms led by CEOs influenced by hubris. The theory posits that hubris impairs moral awareness by causing decision makers to ignore external factors that otherwise drive such awareness. Additionally, these individuals apply a flawed subjective assessment of the decision they face which further impairs moral awareness. The predicted result is that hubris leads managers to invoke an amoral decision process which causes a higher incidence of unethical behavior among these individuals. An empirical study investigates the relationship between CEO hubris and the unethical practice of earnings manipulation. This study finds a significant correlation between CEO hubris and earnings manipulation at the firms they lead, an outcome broadly consistent with the theory developed.

This is a preview of subscription content, access via your institution.

Fig. 1

Notes

  1. Tenbrunsel and Messick (2004) theorize that self-interest triggers self-deception and enables ethical fading. Under the approach set forth here, hubris rather than pure self-interest triggers the fading process.

  2. Clearly an argument exists that any type of earnings management activity is misleading and therefore inappropriate. However, some researchers maintain that earnings management actually improves the quality of publicly available information about a firm over the long term given the asymmetric information managers possess (Tucker and Zarowin 2006). While both these perspectives present interesting and cogent arguments, this paper will avoid this broader debate about the overall appropriateness of earnings management and focus instead on instances of manipulation. That said, hubris is envisioned to impact managerial decision making in ways that can cause individuals that subjectively believe that they are managing earnings to adopt a course of action that objectively constitutes manipulation.

  3. This insight was highlighted within the comments of two of the anonymous reviewers of this manuscript.

  4. At the suggestion of one of the reviewers, the potential moderating effects of insider sales on the hubris factors were also examined. This required independent testing of distinct interaction terms of the insider sales and each hubris factor within independent specifications, using Stata’s “inteff” command (Norton et al. 2004). No statistically significant moderating effects were found in any of these specifications.

References

  • Agrawal, A., & Chadha, S. (2005). Corporate governance and accounting scandals. Journal of Law and Economics, 48(2), 371–406.

    Article  Google Scholar 

  • Amernic, J. H., & Craig, R. J. (2010). Accounting as a facilitator of extreme narcissism. Journal of Business Ethics, 96(1), 79–93.

    Article  Google Scholar 

  • Armstrong, C. S., Jagolinzer, A. D., & Larcker, D. F. (2010). Chief executive officer equity incentives and accounting irregularities. Journal of Accounting Research, 48(2), 225–271.

    Article  Google Scholar 

  • Arrow, K. J. (1963). Uncertainty and the welfare economics of medical care. American Economic Review, 53, 941–973.

    Google Scholar 

  • Arthaud-Day, M. L., Certo, S. T., Dalton, C. M., & Dalton, D. R. (2006). A changing of the guard: Executive and director turnover following corporate financial restatements. Academy of Management Journal, 49(6), 1119–1136.

    Article  Google Scholar 

  • Ashforth, B. E., & Anand, V. (2003). The normalization of corruption in organizations. Research in Organizational Behavior, 25, 1–52.

    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 and states of mind (pp. 161–191). Cambridge: Cambridge University Press.

    Google Scholar 

  • Bargh, J. A., & Pratto, F. (1986). Individual construct accessibility and perceptual selection. Journal of Experimental Social Psychology, 22, 293–311.

    Article  Google Scholar 

  • Bazerman, M. H. (2006). Judgment in managerial decision making. Hoboken, NJ: Wiley.

    Google Scholar 

  • Bazerman, M. H., & Gino, F. (2012). Behavioral ethics: Toward a deeper understanding of moral judgement and dishonesty. Annual Review of Law and Social Science, 8, 85–104.

    Article  Google Scholar 

  • Becker, G. S. (1968). Crime and punishment: An economic approach. Journal of Political Economy, 76, 169–217.

    Article  Google Scholar 

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

    Article  Google Scholar 

  • Berk, R. A. (1983). An introduction to sample selection bias in sociological data. American Sociological Review, 48, 386–398.

    Article  Google Scholar 

  • Bernardo, A. E., & Welch, I. (2001). On the evolution of overconfidence and entrepreneurs. Journal of Economics & Management Strategy, 10, 301–331.

    Article  Google Scholar 

  • Blackwell, R. (2004). Fannie Mae says earnings restatement could produce $9 Billion loss. American Banker, 169(220), 5.

    Google Scholar 

  • Bodolica, V., & Spraggon, M. (2011). Behavioral governance and self-conscious emotions: Unveiling governance implications of authentic and hubristic pride. Journal of Business Ethics, 100, 535–550.

    Article  Google Scholar 

  • Bragues, G. (2008). The ancients against the moderns: Focusing on the character of corporate leaders. Journal of Business Ethics, 78(3), 373–387.

    Article  Google Scholar 

  • Braithwaite, J., & Makkai, T. (1991). Testing and expected utility model of corporate deterrence. Law and Society Review, 25(1), 7–39.

    Article  Google Scholar 

  • Burgstahler, D. C., & Eames, M. J. (2003). Earnings management to avoid losses and earnings decreases: Are analysts fooled? Contemporary Accounting Research, 20(2), 253–294.

    Article  Google Scholar 

  • Burns, N., & Kedia, S. (2008). Executive option exercises and financial misreporting. Journal of Financial Economics, 79, 35–67.

    Article  Google Scholar 

  • Butterfield, K. D., Trevino, L. K., & Weaver, G. R. (2000). Moral awareness in business organizations: Influences of issue-related and social context factors. Human Relations, 53, 981–1018.

    Article  Google Scholar 

  • Caprenter, M. A., Sanders, G., & Gregersen, H. B. (2001). Bundling human capital with organizational context: The impact of international assignment experience on multinational firm Performance and CEO pay. Academy of Management Journal, 44, 493–511.

    Google Scholar 

  • Carpenter, M. A., Geletkanycz, M. A., & Sanders, W. G. (2004). Upper Echelons research revisited: Antecedents, elements, and consequences of top management team composition. Journal of Management, 30(6), 749–778.

    Article  Google Scholar 

  • Carson, T. L. (2003). Self-interest and business ethics: Some lessons of the recent corporate scandals. Journal of Business Ethics, 43, 389–394.

    Article  Google Scholar 

  • Chatterjee, A., & Hambrick, D. (2007). It’s all about me: Narcissitic chief executive officers and their effects on company strategy and performance. Administrative Science Quarterly, 52, 351–386.

    Article  Google Scholar 

  • Chatterjee, A., & Hambrick, D. (2011). Executive personality, capability cues, and risk taking: How narcissistic CEOs react to their successes and stumbles. Administrative Science Quarterly, 56(2), 202–237.

    Article  Google Scholar 

  • Chen, S. (2010). The role of ethical leadership versus institutional constraints: A simulation study of financial misreporting by CEOs. Journal of Business Ethics, 93, 33–52.

    Article  Google Scholar 

  • Cho, T. S., & Hambrick, D. C. (2006). Attention as the mediator between top management team characteristics and strategic change: The case of airline deregulation. Organization Science, 17(4), 453–469.

    Article  Google Scholar 

  • Chugh, D., Bazerman, M. H., & Banaji, M. R. (2005). Bounded ethicality as a psychological barrier to recognizing conflicts of interest. Conflict of Interest: Challenges and Solutions in Business, Law, Medicine and Public Policy, 74, 95.

    Google Scholar 

  • Cooper, A. C., Woo, C. Y., & Dunkelberg, W. C. (1988). Entrepreneurs’ perceived chances for success. Journal of Business Venturing, 3, 97–108.

    Article  Google Scholar 

  • Craig, R., & Amernic, J. (2011). Detecting linguistic traces of destructive narcissism at-a-distance in a CEO’s letter to shareholders. Journal of Business Ethics, 101, 563–575.

    Article  Google Scholar 

  • Craig, R., & Amernic, J. (2014). Exploring signs of hubris in CEO language. Communication and Language Analysis in the Corporate World, 69.

  • Crossland, C., & Hambrick, D. C. (2007). How national systems differ in their constraints on corporate executives: A study of CEO effects in three countries. Strategic Management Journal, 28, 767–789.

    Article  Google Scholar 

  • Crutsinger, M. (2004, December 22). Raines ousted as Fannie Mae CEO. The Seattle Times.  Retrieved from www.seattletimes.com/business/raines-ousted-as-fannie-mae-ceo/.

  • Cyert, R. M., & March, J. G. (1963). A behavioral theory of the firm. Malden, MA: Blackwell.

    Google Scholar 

  • Dash, E. (2006). Regulators Denounce Fannie Mae. New York Times. Retrieved May 24 from http://www.nytimes.com.

  • Dearborn, D. C., & Simon, H. A. (1958). Selective perception: A note on the departmental identification of executives. Sociometry, 21, 140–144.

    Article  Google Scholar 

  • Dechow, P. M., Sloan, R. G., & Sweeney, A. P. (1996). Causes and consequences of earnings manipulations: An analysis of firms subject to enforcement actions by the SEC. Contemporary Accounting Research, 13(1), 1–36.

    Article  Google Scholar 

  • Degeorge, F., Patel, J., & Zeckhauser, R. (1999). Earnings management to exceed thresholds. Journal of Business, 72, 1–33.

    Article  Google Scholar 

  • Dunn, P. (2004). The impact of insider power on fraudulent financial reporting. Journal of Management, 30(3), 397–412.

    Article  Google Scholar 

  • Dye, R. A., & Verrecchia, R. E. (1995). Discretions vs. uniformity: Choices among GAAP. The Accounting Review, 70(3), 389–415.

    Google Scholar 

  • Efedni, J., Srivastava, A., & Swanson, E. P. (2007). Why do corporate managers misstate financial statements? The role of option compensation and other factors. Journal of Financial Economics, 85, 667–708.

    Article  Google Scholar 

  • Eichenwald, K. (1995). Serpent on the rock. New York, NY: HarperBusiness.

    Google Scholar 

  • Erickson, M., Hanlon, M., & Maydew, E. L. (2006). Is there a link between executive equity incentives and accounting fraud? Journal of Accounting Research, 44, 113–143.

    Article  Google Scholar 

  • Fischhoff, B. (1982). Debiasing. In D. Kahneman, P. Slovic, & A. Tversky (Eds.), Judgment under uncertainty: Heuristics and biases. Cambridge: Cambridge University Press.

    Google Scholar 

  • Fiske, S. T., & Taylor, S. E. (1984). Social cognition. New York, NY: Random House.

    Google Scholar 

  • Francis, J., Huang, A. H., Rajgopal, S., & Zang, A. Y. (2008). CEO reputation and earnings quality. Contemporary Accounting Research, 25(1), 109–147.

    Article  Google Scholar 

  • Frank, R. H. (1985). Choosing the right pond: Human behavior and the quest for status. New York, NY: Oxford University Press.

    Google Scholar 

  • Fudenberg, D., & Triole, J. (1995). A theory of income and dividend smoothing based on incumbency rents. Journal of Political Economy, 103(1), 75–93.

    Article  Google Scholar 

  • GAO (2002). Financial statement restatements: Trends, market impacts, regulatory responses, and remaining challenges. U.S. General Accounting Office Report to the Chairman, Committee on Banking, Housing, and Urban Affairs, U.S. Senate.

  • Geletkanycz, M. A., & Boyd, B. K. (2011). CEO outside directorships and firm performance: A reconciliation of agency and embeddedness views. Academy of Management Journal, 54, 335–352.

    Article  Google Scholar 

  • Ghosh, D., & Olsen, L. (2009). Environmental uncertainty and managers’ use of discretionary accruals. Accounting, Organizations and Society, 34(2), 188–205.

    Article  Google Scholar 

  • Goel, A. M., & Thackor, A. V. (2008). Overconfidence, CEO selection, and corporate governance. Journal of Finance, 63(6), 2737–2784.

    Article  Google Scholar 

  • Gordon, M. J. (1964). Postulates, principles, and research in accounting. The Accounting Review, 39, 251–263.

    Google Scholar 

  • Greve, H. R., Palmer, D., & Posner, J. (2010). Organizations gone wild: The causes, processes, and consequences of organizational misconduct. Academy of Management Annals, 4(1), 53–107.

    Article  Google Scholar 

  • Griffin, D. W., & Varey, C. A. (1996). Towards a consensus on overconfidence. Organizational Behavior and Human Decision Processes, 65(3), 227–231.

    Article  Google Scholar 

  • Hagerty, J. R., & McKinnon, J. D. (2004). Scrutiny of Fannie’s accounting could lead to a restatement. Wall Street Journal, A10.

  • Hambrick, D. C. (2007). Upper Echelons theory: An update. Academy of Management Review, 32, 334–343.

    Article  Google Scholar 

  • Hambrick, D. C., Cho, T. S., & Chen, M. (1996). The influence of top management team heterogeneity on firms’ competitive moves. Administrative Science Quarterly, 41(4), 659–684.

    Article  Google Scholar 

  • Hambrick, D. C., & D’Aveni, R. A. (1988). Large corporate failures as downward spirals. Administrative Science Quarterly, 33(1), 1–23.

    Article  Google Scholar 

  • Hambrick, D. C., & Mason, P. (1984). Upper Echelons: The organizations as a reflection of its top managers. Academy of Management Review, 9, 193–206.

    Article  Google Scholar 

  • Harris, J., & Bromiley, P. (2007). Incentives to cheat: The influence of executive compensation and firm performance on financial misrepresentation. Organization Science, 18(3), 350–367.

    Article  Google Scholar 

  • Haynes, K. T., Campbell, J. T., & Hitt, M. A. (2010). Greed, hubris and board power: Effects on firm outcomes. Academy of Management Proceedings, 2010(1), 1–6.

    Article  Google Scholar 

  • Haynes, K. T., Hitt, M. A., & Campbell, J. T. (2015). The dark side of leadership: Towards a mid-range theory of hubris and greed in entrepreneurial contexts. Journal of Management Studies, 52(4), 479–505.

    Article  Google Scholar 

  • Hayward, M. L., & Hambrick, D. C. (1997). Explaining the premiums paid for large acquisitions: Evidence of CEO hubris. Administrative Science Quarterly, 42, 103–127.

    Article  Google Scholar 

  • Hayward, M. L., Rindova, V. P., & Pollock, T. G. (2004). Beleiving one’s own press: The causes and consequences of CEO ego. Strategic Management Journal, 25, 637–653.

    Article  Google Scholar 

  • Hayward, M. L., Shepherd, D. A., & Griffin, D. (2006). A hubris theory of entrepreneurship. Management Science, 52(2), 160–172.

    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 earnings management literature and its implications for standard setting. Accounting Horizons, 13(4), 365–383.

    Article  Google Scholar 

  • Hiller, N. J., & Hambrick, D. C. (2005). Conceptualizing executive hubris: The role of (Hyper-)core self-evaluations in strategic decision-making. Strategic Management Journal, 26, 297–319.

    Article  Google Scholar 

  • Hilzenrath, D. s. (2008). Raines, federal regulators reach settlement. Washington Post. Retrieved April 18 from http://www.washintonpost.com

  • Hmieleski, K. M., & Baron, R. A. (2009). Entrepreneurs’ optimism and new venture performance: A social cognitive perspective. Academy of Management Journal, 52(3), 473–488.

    Article  Google Scholar 

  • Huslin, A. (2008). On the outside now watching Fannie Falter. Washington Post. Retrieved July 16 from www.washingtonpost.com.

  • Imhoff, E. A. (1981). Income smoothing: An analysis of critical issues (pp. 23–42). Autumn: Quarterly Review of Economics and Business.

    Google Scholar 

  • 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 

  • Jensen, M. C., & Murphy, K. J. (1990). Performance pay and top-management incentives. Journal of Political Economy, 98(2), 225–264.

    Article  Google Scholar 

  • Jiang, J., Petroni, K. R., & Wang, I. Y. (2010). CFOs and CEOs: Who have the most influence on earnings management? Journal of Financial Economics, 96(3), 513–526.

    Article  Google Scholar 

  • Johnson, S. A., Ryan, H. E., & Tian, Y. S. (2009). Managerial incentives and corporate fraud: The sources of incentives matters. Review of Finance, 13, 115–145.

    Article  Google Scholar 

  • Jones, T. M. (1991). Ethical decision making by individuals in organizations: An issue-contingent model. Academy of Management Review, 16, 366–395.

    Article  Google Scholar 

  • Judge, T. A., Piccolo, R. F., & Kosalka, T. (2009). The bright and the dark side of leadership traits: A review and extension of the leader trait paradigm. The Leadership Quarterly, 20(6), 855–875.

    Article  Google Scholar 

  • Kahneman, D. (2011). Thinking, fast and slow. New York, NY: Farrar, Straus and Giroux.

    Google Scholar 

  • Kahneman, D., & Lovallo, D. (1993). Timid choices and bold forecasts: A cognitive perspective on risk taking. Management Science, 39, 17–31.

    Article  Google Scholar 

  • Kahneman, D., Slovic, P., & Tversky, A. (1982). Judgment under uncertainty: Heuristics and biases. New York, NY: Cambridge University Press.

    Book  Google Scholar 

  • Kahneman, D., & Tversky, A. (1979). Prospect theory: An analysis of decision under risk. Econmetrica, 47(2), 263–292.

    Article  Google Scholar 

  • Karpoff, J. M., Lee, D. S., & Martin, G. S. (2009). The cost to firms of cooking the books. Journal of Financial and Quantitative Analysis, 43(3), 581–611.

    Article  Google Scholar 

  • Kedia, S., & Philippon, T. (2009). The economics of fraudulent accounting. Review of Financial Studies, 22(6), 2169–2199.

    Article  Google Scholar 

  • Kroll, M. J., Toombs, L. A., & Wright, P. (2000). Napoleon’s tragic march home from Moscow: Lessons in hubris. Academy of Management Executive, 14(1), 117–128.

    Google Scholar 

  • Lawrence, D. Y., Pazzaglia, F., & Sonpar, K. (2011). The introduction of a non-traditional and aggressive approach to banking: The risk of hubris. Journal of Business Ethics, 102, 401–420.

    Article  Google Scholar 

  • Lee, C. J., Li, L. Y., & Yue, H. (2006). Performance, growth, and earnings management. Review of Accounting Studies, 11(2–3), 304–334.

    Google Scholar 

  • Levinthal, D. A. (1997). Adaptation on rugged landscapes. Management Science, 43, 934–950.

    Article  Google Scholar 

  • Lewis, M. (1989). Liar’s Poker. New York, NY: W.W. Norton & Company.

    Google Scholar 

  • Li, J., & Tang, Y. (2010). CEO hubris and firm risk taking in China: The moderating role of managerial discretion. Academy of Management Journal, 53(1), 45–68.

    Article  Google Scholar 

  • Li, J., & Tang, Y. (2013). The social influence of executive hubris. Management International Review, 58, 83–107.

    Article  Google Scholar 

  • Mackey, A. (2008). The effects of CEOs on firm performance. Strategic Management Journal, 29, 1357–1367.

    Article  Google Scholar 

  • Malmendier, U., & Tate, G. (2009). Superstar CEOs. Quarterly Journal of Economics, 124(4), 1593–1638.

    Article  Google Scholar 

  • Malmendier, U., Tate, G., & Yan, J. (2011). Overconfidence and early life experiences: The effect of managerial traits on corporate financial policies. Journal of Financial Economics, 66(5), 1687–1733.

    Google Scholar 

  • March, J. G. (1994). A primer on decision making: How decisions happen. New York, NY: The Free Press.

    Google Scholar 

  • March, J. G. (1997). How decisions happen in organizations. In Z. Shapira (Ed.), Organization decision making (pp. 9–32). Cambridge, UK: Cambridge University Press.

    Google Scholar 

  • March, J. G., & Simon, H. A. (1958). Organizations. Cambridge, MA: Blackwell.

    Google Scholar 

  • Marquardt, C., & Wiedman, C. (2005). Earnings management through transaction structuring: Contingent convertible debt and diluted earnings per share. Journal of Accounting Research, 43(2), 205–243.

    Article  Google Scholar 

  • McCarthy, A. M., Schoorman, F. D., & Cooper, A. C. (1993). Reinvestment decisions by entrepreneurs: Rational decision making or escalation of commitment? Journal of Business Venturing, 8(1), 9–24.

    Article  Google Scholar 

  • McClean, B., & Elkind, P. (2003). The smartest guys in the room: The amazing rise and scandalous fall of Enron. New York, NY: Penguin Group.

    Google Scholar 

  • McClean, B., & Nocera, J. (2010). All the devils are here. New York, NY: Portfolio/Penguin.

    Google Scholar 

  • McNichols, M., & Wilson, P. (1988). Evidence of earnings management from the provision for bad debts. Journal of Accounting and Public Policy, 26, 1–31.

    Google Scholar 

  • Meindl, J. R., Ehrlich, S. R., & Dukerich, J. M. (1985). The romance of leadership. Administrative Science Quarterly, 30, 78–102.

    Article  Google Scholar 

  • Messick, D. M. (1999). Alternative logics for decision making in social settings. Journal of Economic Behavior & Organization, 39(1), 11–30.

    Article  Google Scholar 

  • Messick, D. M., & Bazerman, M. H. (1996). Ethical leadership and the psychology of decision making. Sloan Management Review, 37(2), 9–22.

    Google Scholar 

  • Mishina, Y., Dykes, B. J., Block, E. S., & Pollock, T. G. (2010). Why “Good” firms do bad things: The effects of high aspirations, high expectations and prominence on the incidence of corporate illegality. Academy of Management Journal, 53(4), 701–722.

    Article  Google Scholar 

  • Moore, D. A., & Healy, P. J. (2008). The trouble with overconfidence. Psychological Review, 115(2), 502.

    Article  Google Scholar 

  • Ndofor, H. A., Wesley, C., & Priem, R. L. (2015). Providing CEOs with opportunities to cheat the effects of complexity-based information asymmetries on financial reporting fraud. Journal of Management, 41(6), 1774–1797.

    Article  Google Scholar 

  • Norton, E. C., Wang, H., & Ai, C. (2004). Computing interaction effects and standard errors in logit and probit models. The Stata Journal, 4(2), 154–167.

    Google Scholar 

  • O’Connor, J. P., Priem, R. L., Coombs, J. E., & Gilley, K. M. (2006). Do CEO stock options prevent or promote fraudulent financial reporting? Academy of Management Journal, 49(3), 483–500.

    Article  Google Scholar 

  • Palich, L. E., & Bagby, D. R. (1995). Using cognitive theory to explain entrepreneurial risk taking: Challenging conventional wisdom. Journal of Business Venturing, 10(6), 425–438.

    Article  Google Scholar 

  • Palmer, D. (2008). Extending the process model of collective corruption. Research in Organizational Behavior, 28, 107–135.

    Article  Google Scholar 

  • Palmer, D. (2012). Normal organizational wrongdoing. Great Britain: Oxford University Press.

    Book  Google Scholar 

  • Peng, L., & Xiong, W. (2006). Investor attention, overconfidence and category learning. Journal of Financial Economics, 80, 563–602.

    Article  Google Scholar 

  • Petit, V., & Bollaert, H. (2012). Flying too close to the sun? Hubris among CEOs and how to prevent it. Journal of Business Ethics, 108, 265–283.

    Article  Google Scholar 

  • Petroni, K. R. (1992). Optimistic reporting in the property casualty insurance industry. Journal of Accounting and Economics, 15, 485–508.

    Article  Google Scholar 

  • Pettigrew, A. M. (1992). On studying managerial elites. Strategic Management Journal, 13, 163–182.

    Article  Google Scholar 

  • Picone, P. M., Dagnino, G. B., & Mina, A. (2014). The origin of failure: Appraisal of the hubris hypothesis and proposed research agenda. Academy of Management Perspectives, 28(4), 447–468.

    Article  Google Scholar 

  • Press, S. J., & Wilson, S. (1978). Choosing between logistic regression and discriminant analysis. Journal of the American Statistical Association, 73, 699–705.

    Article  Google Scholar 

  • Rest, J. R. (1986). Moral development: Advances in research and theory. New York, NY: Praeger.

    Google Scholar 

  • Reynolds, S. J. (2006). Moral awareness and ethical predispositions: Investigating the role of individual differences in the recognition of moral issues. Journal of Applied Psychology, 91, 233–243.

    Article  Google Scholar 

  • Reynolds, S. J. (2008). Moral attentiveness: Who pays attention to the moral aspects of life? Journal of Applied Psychology, 93(5), 1027–1041.

    Article  Google Scholar 

  • Rijsenbilt, A., & Commandeur, H. (2013). Narcissus enters the courtroom: CEO narcissism and fraud. Journal of Business Ethics, 117, 413–429.

    Article  Google Scholar 

  • Roll, R. (1986). The hubris hypothesis of corporate takeovers. Journal of Business, 59, 197–216.

    Article  Google Scholar 

  • Ronen, J., & Sadan, S. (1981). Smoothing income numbers: Objectives, means, and implications. Reading, MA: Addison-Wesley.

    Google Scholar 

  • Schoenberger, E. (2001). Corporate autobiographies: The narrative strategies of corporate strategists. Journal of Economic Geography, 1, 277–298.

    Article  Google Scholar 

  • Securities and Exchange Commission. (2015). All about auditors. Retrieved March 31, 2015 from http://www.sec.gov/investor/pubs/aboutauditors.htm

  • Simon, H. A. (1947). Administrative behavior. New York, NY: Macmillan.

    Google Scholar 

  • Simon, M., & Houghton, S. M. (2003). The relationship between overconfidence and the introduction of risky products: Evidence from a Field study. Academy of Management Journal, 46(2), 139–150.

    Google Scholar 

  • Simon, M., Houghton, S. M., & Aquino, K. (2000). Cognitive biases, risk perception and venture formation: How individuals decide to start companies. Journal of Business Venturing, 15, 113–134.

    Article  Google Scholar 

  • Simon, M., & Shrader, R. C. (2012). Entrepreneurial actions and optimistic overconfidence: The role of motivated reasoning in new product introductions. Journal of Business Venturing, 27, 291–301.

    Article  Google Scholar 

  • Sparks, J. R., & Hunt, S. D. (1998). Marketing researcher ethical sensitivity: Conceptualization, measurement, and exploratory investigation. Journal of Marketing, 62, 92–109.

    Article  Google Scholar 

  • Spence, M. (1973). Job market signaling. Quarterly Journal of Economics, 87(3), 355–374.

    Article  Google Scholar 

  • Stewart, J. B. (1991). Den of thieves. New York, NY: Simon & Schuster.

    Google Scholar 

  • Tang, Y., Li, J., & Yang, H. (2015). What I see, what I do: How executive hubris affects firm innovation. Journal of Management, 41(6), 1698–1723.

    Article  Google Scholar 

  • Tenbrunsel, A. E. (1998). Misrepresentation and expectations of misrepresentation in an ethical dilemma: The role of incentives and temptation. Academy of Management Journal, 41, 330–339.

    Google Scholar 

  • Tenbrunsel, A. E., & Messick, D. M. (2004). Ethical fading: The role of self-deception in unethical behavior. Social Justice Research, 17(2), 223–235.

    Article  Google Scholar 

  • Tenbrunsel, A. E., & Smith-Crowe, K. (2008). Ethical decision making: Where we’ve been and where we’re going. Academy of Management Annals, 2(1), 545–607.

    Article  Google Scholar 

  • Thaler, R. H., & Sunstein, C. R. (2008). Nudge. New Haven, CT: Yale University Press.

    Google Scholar 

  • Tosi, H. L., & Gomez-Mejia, L. R. (1989). The decoupling of CEO pay and performance: An agency theory perspective. Administrative Science Quarterly, 34, 169–189.

    Article  Google Scholar 

  • Trevino, L. K. (1986). Ethical decision making in organizations: A person-situation interactionist model. Academy of Management Review, 11(3), 601–617.

    Article  Google Scholar 

  • Trevino, L. K., Weaver, G. R., & Reynolds, S. J. (2006). Behavioral ethics in organizations: A review. Journal of Management, 32(6), 951–990.

    Article  Google Scholar 

  • Tucker, J. W., & Zarowin, P. A. (2006). Does income smoothing improve earnings informativeness? Accounting Review, 81(1), 251–270.

    Article  Google Scholar 

  • Tversky, A., & Kahneman, D. (1974). Judgement under uncertainty: Heuristics and biases. Science, 185, 1124–1131.

    Article  Google Scholar 

  • U.S. Securities and Exchange Commission (2006). SEC and OFHEO announce resolution of investigation and special examination of Fannie Mae. Retrieved from www.sec.gov/news/press/2006/2006-80.htm.

  • Waples, E. P., Antes, A. L., Murphy, S. T., Connelly, S., & Mumford, M. D. (2009). A meta-analytical investigation of business ethics instruction. Journal of Business Ethics, 87(1), 133–151.

    Article  Google Scholar 

  • Wouters, K., Maesschalck, J., Peeters, C. F., & Roosen, M. (2014). Methodological issues in the design of online surveys for measuring unethical work behavior: Recommendations on the basis of a split-ballot experiment. Journal of Business Ethics, 120, 275–289.

    Article  Google Scholar 

  • Zahra, S. A., Priem, R. L., & Rasheed, A. A. (2005). The antecedents and consequences of top management fraud. Journal of Management, 31(6), 803–828.

    Article  Google Scholar 

  • Zajac, E. J., & Westphal, J. D. (1995). Accounting for the explanations of CEO compensation: Substance and symbolism. Administrative Science Quarterly, 40(2), 283–308.

    Article  Google Scholar 

  • Zhang, X., Bartol, K. M., Smith, K. G., Pfarrer, M. D., & Khanin, D. M. (2008). CEOs on the edge: Earnings manipulation and stock-based incentive misalignment. Academy of Management Journal, 51(2), 241–258.

    Article  Google Scholar 

Download references

Author information

Authors and Affiliations

Authors

Corresponding author

Correspondence to Joseph McManus.

Rights and permissions

Reprints and Permissions

About this article

Verify currency and authenticity via CrossMark

Cite this article

McManus, J. Hubris and Unethical Decision Making: The Tragedy of the Uncommon. J Bus Ethics 149, 169–185 (2018). https://doi.org/10.1007/s10551-016-3087-9

Download citation

  • Received:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s10551-016-3087-9

Keywords

  • Earnings manipulation
  • Entrepreneurial decision making
  • Ethical decision making
  • Hubris
  • Moral awareness
  • Upper Echelon perspective