Details
| Original language | English |
|---|---|
| Journal | Journal of Management and Governance |
| Early online date | 2 Sept 2024 |
| Publication status | E-pub ahead of print - 2 Sept 2024 |
Abstract
In this experimental investigation, we explore the impact of justification on project choices. Introducing a novel element, we implement asymmetric payoff schemes commonly employed in business, signifying distinct payoff distributions for the firm (principal) and the manager (agent). The agent has to choose one project from two options that differ in their risk-return profiles. The outcomes of our experiment substantiate our hypothesis, indicating that a mandate for justification decreases the probability of agents selecting the project with higher risk and return. The degree of this reduction appears to hinge on the nature of justification. Increased profit shares for the agent or a project recommendation from the principal can partially counterbalance the distortion in the project choice.
Keywords
- Agency, Behavioral accounting, C72, C91, D81, Experiment, Incentives, Justification, M40, M52, Project selection
ASJC Scopus subject areas
- Business, Management and Accounting(all)
- Business and International Management
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In: Journal of Management and Governance, 02.09.2024.
Research output: Contribution to journal › Article › Research › peer review
}
TY - JOUR
T1 - Exploring decision-making
T2 - experimental observations on project selection and the impact of justification pressure
AU - Lukas, Christian
AU - Neubert, Max Frederik
AU - Schöndube, Jens Robert
PY - 2024/9/2
Y1 - 2024/9/2
N2 - In this experimental investigation, we explore the impact of justification on project choices. Introducing a novel element, we implement asymmetric payoff schemes commonly employed in business, signifying distinct payoff distributions for the firm (principal) and the manager (agent). The agent has to choose one project from two options that differ in their risk-return profiles. The outcomes of our experiment substantiate our hypothesis, indicating that a mandate for justification decreases the probability of agents selecting the project with higher risk and return. The degree of this reduction appears to hinge on the nature of justification. Increased profit shares for the agent or a project recommendation from the principal can partially counterbalance the distortion in the project choice.
AB - In this experimental investigation, we explore the impact of justification on project choices. Introducing a novel element, we implement asymmetric payoff schemes commonly employed in business, signifying distinct payoff distributions for the firm (principal) and the manager (agent). The agent has to choose one project from two options that differ in their risk-return profiles. The outcomes of our experiment substantiate our hypothesis, indicating that a mandate for justification decreases the probability of agents selecting the project with higher risk and return. The degree of this reduction appears to hinge on the nature of justification. Increased profit shares for the agent or a project recommendation from the principal can partially counterbalance the distortion in the project choice.
KW - Agency
KW - Behavioral accounting
KW - C72
KW - C91
KW - D81
KW - Experiment
KW - Incentives
KW - Justification
KW - M40
KW - M52
KW - Project selection
UR - http://www.scopus.com/inward/record.url?scp=85202927639&partnerID=8YFLogxK
U2 - 10.1007/s10997-024-09717-9
DO - 10.1007/s10997-024-09717-9
M3 - Article
AN - SCOPUS:85202927639
JO - Journal of Management and Governance
JF - Journal of Management and Governance
SN - 1385-3457
ER -