PlumX Metrics
SSRN
Embed PlumX Metrics

Managers’ Ethical Evaluations of Earnings Management and its Consequences

Contemporary Accounting Research, Forthcoming
2011
  • 2
    Citations
  • 6,013
    Usage
  • 2
    Captures
  • 0
    Mentions
  • 0
    Social Media
Metric Options:   Counts1 Year3 Year

Metrics Details

  • Citations
    2
    • Citation Indexes
      2
  • Usage
    6,013
    • Abstract Views
      4,767
    • Downloads
      1,246
  • Captures
    2
    • Readers
      2
      • SSRN
        2
  • Ratings
    • Download Rank
      33,479

Paper Description

Despite a recent focus on the ethics of earnings management, research has generally not examined the specific ethical dilemma that arises when a choice to engage in earnings management results in positive organizational consequences. This study focuses on the consequences of earnings management behavior in response to the question: Do the ends of positive organizational consequences justify the means of earnings management? We investigate manager evaluations of, and reactions to, a scenario in which a hypothetical employee makes a choice whether or not to engage in earnings management behavior, with consequences that are either favorable or unfavorable to the organization. Two hundred and sixty-four experienced managers provided responses to the scenario in a controlled experimental research design. The results indicate that managers may be motivated to discount the ethical impact of earnings management behavior when the consequence has a favorable impact on the organization—implying that the ends justify the means. This finding, in turn, suggests that incrementalism, or the ethical “slippery slope” of overlooking seemingly minor ethical breaches, can undermine efforts to establish a strong ethical tone throughout the organization. Implications of these findings for corporate governance and future research are discussed.

Bibliographic Details

Eric N. Johnson; Gary Fleischman; Sean Valentine; Kenton B. Walker

earnings management; ethics; consequences; moral intensity

Provide Feedback

Have ideas for a new metric? Would you like to see something else here?Let us know