TY - JOUR
T1 - The role of accountability in reducing the impact of affective reactions on capital budgeting decisions
AU - Fehrenbacher, Dennis D.
AU - Kaplan, Steven E.
AU - Moulang, Carly
N1 - Funding Information:
This paper has benefited from helpful comments by Theresa Libby (editor) and two anonymous reviewers, as well as Janet Samuels, Lauren Matkaluk, and participants at the 2018 JIAR conference, the 2018 EAA conference, and the University of Central Florida research seminar series. We also acknowledge funding from CIMA Australia for this project. Finally, we acknowledge the work of our dear friend and colleague, the Late Maria Strydom, in the early work related to this project.
Funding Information:
This paper has benefited from helpful comments by Theresa Libby (editor) and two anonymous reviewers, as well as Janet Samuels, Lauren Matkaluk, and participants at the 2018 JIAR conference, the 2018 EAA conference, and the University of Central Florida research seminar series. We also acknowledge funding from CIMA Australia for this project. Finally, we acknowledge the work of our dear friend and colleague, the Late Maria Strydom, in the early work related to this project.
Publisher Copyright:
© 2019 Elsevier Ltd
PY - 2020/6
Y1 - 2020/6
N2 - It is generally recognized that decisions about capital projects should be made by independent reviewers who select the economically strongest projects. However, prior research finds that reviewers’ choices can be biased by their affective reactions to a manager proposing a capital project. Potentially, this bias could be reduced by holding reviewers more accountable. We contend that holding reviewers accountable will lessen the effect of positive, but not negative, affective reactions on capital project choice. To provide evidence on our predictions, we conduct an experiment using highly experienced participants. Participants’ task is to select between two capital projects, each proposed by a different manager. Although one project is economically preferred relative to the other project, we manipulate whether there is a negative affective reaction to the manager proposing the preferred project or a positive affective reaction to the manager proposing the non-preferred project. We also manipulate the presence versus absence of reviewer accountability. As expected, participants were more likely to select the economically non-preferred project when proposed by a manager triggering a positive affective reaction, but this tendency was reduced by accountability. Also, as expected, participants were less likely to select the economically preferred project when proposed by a manager triggering a negative affective reaction, and accountability did not reduce this tendency. Implications of our findings for theory and practice are discussed.
AB - It is generally recognized that decisions about capital projects should be made by independent reviewers who select the economically strongest projects. However, prior research finds that reviewers’ choices can be biased by their affective reactions to a manager proposing a capital project. Potentially, this bias could be reduced by holding reviewers more accountable. We contend that holding reviewers accountable will lessen the effect of positive, but not negative, affective reactions on capital project choice. To provide evidence on our predictions, we conduct an experiment using highly experienced participants. Participants’ task is to select between two capital projects, each proposed by a different manager. Although one project is economically preferred relative to the other project, we manipulate whether there is a negative affective reaction to the manager proposing the preferred project or a positive affective reaction to the manager proposing the non-preferred project. We also manipulate the presence versus absence of reviewer accountability. As expected, participants were more likely to select the economically non-preferred project when proposed by a manager triggering a positive affective reaction, but this tendency was reduced by accountability. Also, as expected, participants were less likely to select the economically preferred project when proposed by a manager triggering a negative affective reaction, and accountability did not reduce this tendency. Implications of our findings for theory and practice are discussed.
KW - Accountability
KW - Affect
KW - Capital budgeting
KW - Decision-making
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U2 - 10.1016/j.mar.2019.100650
DO - 10.1016/j.mar.2019.100650
M3 - Article
AN - SCOPUS:85075434634
SN - 1044-5005
VL - 47
JO - Management Accounting Research
JF - Management Accounting Research
M1 - 100650
ER -