In Search of Informed Discretion (Revisited): Do Managers Want to Be Fair or Not Appear Selfish?

Co-authored with Bart Dierynck and Jesse van der Geest

We examine managers' motives for obtaining additional, costly information, allowing them to assess employee contributions in a team setting more accurately. Maas, van Rinsum, Towry (The Accounting Review, 2012) document managers obtain additional, costly information because they have, next to self-interested motives, also preferences for fair outcomes. Yet, managers may also be willing to obtain additional, costly information because they have concerns about appearing selfish either to themselves or to employees. To test this ulterior motive, we replicated the quasi-experiment of Maas et al. (2012) and designed an extension in which managers have a separate opt-out option of the information acquisition process. A separate opt-out option should reduce managers' concerns about appearing selfish but it should not influence results if managers' preference for fair outcomes exclusively drives their willingness to obtain additional, costly information. We replicate the results of Maas et al. (2012) but also find that managers are less willing to obtain additional, costly information in our extension relative to our replication. We conclude that managers' reasons for obtaining additional, costly information during the performance evaluation process may not solely be driven by preferences for fair outcomes but also by concerns about appearing selfish.

Public Tax Disclosures and Investor Perceptions

Co-authored with Bart Dierynck, Martin Jacob, Maximilian Müller, and Christian Peters

To increase awareness of aggressive corporate tax avoidance, governments and tax authorities are considering and implementing policies that mandate the public disclosure of corporate taxes. In this study, we investigate how these policies affect retail investors' perceptions. Building on attribute substitution theory, we expect that public disclosure of corporate taxes causes retail investors to over-rely on the amount of corporate taxes that is publicly disclosed while losing sight of the underlying tax avoidance methods. Consequently, we predict that public disclosure of corporate taxes causes retail investors to differentiate less between firms that use different tax avoidance methods. Consistent with our prediction, the results of our experiment show that public disclosure of corporate taxes indeed causes retail investors to differentiate less between firms with different tax avoidance methods when inferring whether these firms are paying their fair share of taxes. We also find that retail investors' perceptions about whether firms are paying their fair share of taxes subsequently affect their perceptions about investing in firms. These results present a cautionary note to governments and tax authorities considering policies that mandate the public disclosure of corporate taxes.

Are All Readers on the Same Page? Predicting Variation in Information Retrieval from Financial Narratives

Co-authored with Ties de Kok and Christoph Sextroh

Retrieving information from financial narratives is a complex process that depends on how the text characteristics of narratives interact with the financial literacy of users. In this study, we develop a comprehensive measure for variation in information retrieval based on observed user behavior that is also able to incorporate understudied text characteristics such as the semantics and content of a narrative. Using a tool that tracks reading and marking behavior in a controlled environment, we first document how users with varying degrees of financial literacy retrieve information from financial narratives. We find significant variation among financial literacy groups that cannot be solely explained by text characteristics related to processing costs. Next, we use state-of-the-art machine-learning to predict variation in information retrieval for out-of-sample financial narratives, and we show that these predictions are incrementally associated with the post-announcement return volatility. Overall, our results suggest that efforts by regulators and corporations to simplify text characteristics of corporate communications might not resolve all differences in how users retrieve information from financial narratives.

Asymmetric Adjustment of Control

Job market paper

In this study, I examine how principals adjust their control over agents depending on their controlling experience. Principals should be equally willing to decrease their control over agents as they are to increase their control over agents. However, building on theory in psychology, I predict that controlling agents in the past reinforces a principal’s belief that agents are self-interested and that they should be controlled. Therefore, principals should be less willing to decrease their control over agents than they are to increase their control over agents. The results of my experiment support my predictions and also reveal that the asymmetry in principals’ control adjustments disappears when they have less time to reinforce the belief that agents are self-interested before their control adjustment and more time to revise it after their control adjustment. My study contributes to the accounting literature by showing that experience with controlling agents may cause principals to disproportionately hold onto to their control.

Doing the Right Thing: The Effect of Rotation Policies on Managers’ Reports about Operational Distortion

Co-authored with Eddy Cardinaels and Bart Dierynck

Operating distortion causes inefficiencies in performance measurement systems and typically remains hidden in firms’ operational layers, unless managers report its occurrence. One obstacle to managers reporting operating distortion is that they often benefit economically from remaining silent about it, which causes them to morally disengage from the reporting decision. In this study, we examine whether the prospect of rotating to another business unit decreases moral disengagement among managers and induces them to report more of the operating distortion in their current business unit. Results from our experiment support our prediction and confirm that the prospect of rotation decreases the likelihood that managers will morally disengage from the reporting decision. Our study contributes to research on operating distortion and managerial reporting and has important implications for firms looking to resolve inefficiencies in performance measurement systems in business units.

The Sorting Benefits of Discretionary Adjustment to Performance-based Pay

Co-authored with Bart Dierynck

We use an experiment to test the hypothesis that adding discretionary adjustment to performance-based pay strengthens the sorting of employees based on how strongly they identify with the organization’s objectives. Our conceptualization of identification is grounded in identity economics, which predicts that employees who identify strongly with the organization’s objectives exert greater effort toward those objectives than employees who identify weakly with those objectives. Building on this conceptualization, we expect that employees anticipate that managers will adjust performance-based pay more (less) favorably when employees reveal strong (weak) identification with the organization’s objectives. Thus, when managers can adjust performance-based pay, performance-based pay contains a feature that benefits (disadvantages) employees with strong (weak) identification, which we expect to strengthen the sorting of employees based on their identification. Consistent with our hypothesis, we find that the difference in preferences for performance-based pay between employees with strong and weak identification is larger when discretionary adjustment accompanies performance-based pay than when it does not. Our results also confirm that employee identification increases employee costly effort exertion toward the organization’s objectives. We contribute to the management accounting literature on discretion in performance evaluation by documenting a previously undocumented benefit of discretionary adjustment.


WHU - Otto Beisheim School of Management

  • Conducting and Communicating Research (Advanced Undergraduate Course)
  • Human Data Elicitation Tools (Advanced Undergraduate Course)

Tilburg University

  • Behavioral Analysis of Accounting (Ph.D and Research Master Course)
  • MSc Thesis Accounting (Advanced Graduate Course)
  • Management Accounting (Intermediate Undergraduate Course)
  • Financial Accounting (Introductory Undergraduate Course)


Blog posts about programming accounting experiments

Lecture on experimental accounting research and oTree

Manuscript with a few writing aspirations for students

Slides about conducting and communicating about research