Event type Hybrid Event
Location
Room BZ E4.23 | Universitätsplatz 1 - piazza Università, 1
Bozen
Location Information
Departments ECO Faculty
Contact
Loris Vigna
loris.vigna@unibz.it
18 Apr 2024 12:00-13:00
Does accountability improve managers’ economic judgments?
Research Seminar - Dr. Martin Stähle, CFO, InnoMedica Switzerland AG, discusses the case of depreciation method effects on asset selling prices
Event type Hybrid Event
Location
Room BZ E4.23 | Universitätsplatz 1 - piazza Università, 1
Bozen
Location Information
Departments ECO Faculty
Contact
Loris Vigna
loris.vigna@unibz.it
Prior studies show that accounting choices for external reporting purposes can bias managers’ economic judgments when managers rely on accounting information for their judgments. We use an experiment to investigate whether increasing accountability (i.e., requiring decision makers to justify their judgments) mitigates the effect of depreciation method choices on an asset’s selling price. Contrary to common intuition and arguments voiced in the literature, we find that increasing accountability exacerbates the judgment bias. Justification pressures for managers reduce their confidence when making judgments. In consequence, they increase their use of all the available information, including irrelevant accounting information, to support their selling price judgments. Our findings inform firms, investors, and regulators that calls for increased managerial accountability pressures may backfire when decision makers attend to accounting information that is normatively irrelevant for their economic decisions.
For online participation, please register at the link below