Melbourne Accounting Research Seminar - Associate Professor Jason Kuang

Associate Professor Jason Kuang from Georgia Institute of Technology will present a MARS seminar.

Topic: Accountability, construal levels, and managerial decision making

Abstract: Prior research suggests that holding managers accountable for their decision process improves performance and leads to better decision making. However, we argue that process accountability can push managers into a lower construal level and impair the quality of their decision in tasks that are prone to presentational biases such as the numerosity heuristic (i.e., overly focusing on the nominal value of quantitative information while neglecting its measurement unit). We propose that an alternative accountability focus, which requests managers to justify why their actions and decisions help achieve the organization’s strategic objective, can lead them into a higher construal level, mitigating the bias. Consistent with our predictions, our experimental results show that, in a forecasting and investing setting, process accountability leads to lower construal level than objective accountability does. Under process accountability, individuals make more positive forecasts and greater investments when financial performance information is presented in larger nominal values (i.e., smaller units) than when the same information is presented in smaller nominal values (i.e., larger units), and this effect is attenuated under objective accountability. Implications of our findings for accounting theory and practice are discussed.