The Moderator Role of Followership Style and Honesty-Humility Attitude of Financial Managers on the Impact of Social and Environmental Pressure on Aggressive Financial Reporting Behavior

Document Type : Research Paper

Authors

1 Ph.D Candidate in Accounting, Isfahan (Khorasgan) Branch, Islamic Azad University, Isfahan, Iran.

2 Assistant Professor of Accounting, Isfahan (Khorasgan) Branch, Islamic Azad University, Isfahan, Iran.

10.22103/jak.2021.15814.3248

Abstract

Objective: Aggressive financial reporting means that the company delays reporting bad news and shows speed in reporting good news. Although sources of pressure (social pressure and corporate risk appetite) play a large role in this unethical behavior, companies' willingness to provide Aggressive financial reporting can also be influenced by a variety of factors, including psychological, sociological, and ethical motivations. The purpose of this study is to investigate the effect of financial managers' honesty-humility and followership style (with emphasis on sources of pressure) on Aggressive financial reporting behavior.
 Method: Data was collected using Scenario-based questionnaire, and the data analysis method was inferential. Scenario-based questionnaire was used to test the research hypotheses, taken from the research of Brink (2018) and Bishap (2017). Research time zone of 2020 and Statistical population includes financial managers. The sample of research based on Cohen (2000) table is 160 financial managers. Analysis of variance was used to test the research hypotheses.
 Results: The results showed that decreasing the honesty-humility of financial managers, the effect of obedience pressure on aggressive financial reporting is less and the effect of aggressive risk appetite on aggressive financial reporting is greater. Also, with increasing honesty-humility of financial managers, the interaction impact of social pressure and risk appetite on aggressive financial reporting is less. In examining the moderating effect of followershipstyle, the results showed that the high tendency of financial managers to follow the style of non-critical, dependent and passive thinking, the effect of obedience pressure and the impact of aggressive risk appetite on aggressive financial reporting is greater but the interaction impact of social pressure and risk appetite on aggressive financial reporting is less..
 Conclusion: In sum, the results show that the interaction of social and risk appetite pressure resources on aggressive financial reporting is influenced by the modifiers of follow-up and honesty-humility of financial managers. Recognizing the factors affecting the unethical behaviors of financial managers, can be the basis for proper planning of companies in the process of attracting successful financial managers and the vigilance of board members, the audit committee in the face of suspicious behavior. This can, to some extent, prevent them from presenting aggressive financial reporting. Knowing these factors can also increase the ability of accounting professionals to detect and prevent fraud. The potential for aggressive financial reporting stemming from social pressures from superiors and peers should also be of interest to an organization’s auditors and audit committee, since both pressures may lead to management override of controls or collusion, which are inherent limitations of any internal control system. Thus, it is imperative for auditors and audit committees to be aware of the presence and possible effects of social pressures and to create mechanisms that increase awareness of, and effectively alleviate, the negative influence of such pressures.

Keywords

References

دلاور، علی. (1387). روش پژوهش در روانشناسی و علوم تربیتی، تهران، انتشارات ویرایش.
دلاور، علی. (1396). طرح‌های آزمایشی در روانشناسی و علوم تربیتی، تهران، انتشارات سمت.
رضازاده، جواد؛ بکشلو، عاطفه. (1393). گزارشگری مالی متهورانه و آگاهی‌بخشی قیمت سهام. پژوهش‌های کاربردی در گزارشگری مالی، (5)3، 22-7.
رضایی، اکبر. (1394). راهنمای گام به گام برای تحلیل داده‌ها با استفاده از برنامه SPSS، تهران، انتشارات فروزش.
قره خانی، محسن؛ نصیری، فاطمه. (۱۳۹۴). نقش اشتهای ریسک در پیاده سازی مدیریت ریسک سازمان، دوازدهمین کنفرانس بین‌المللی مهندسی صنایع، تهران، انجمن مهندسی صنایع ایران، دانشگاه خوارزمی.
نادری، حبیب‌اله؛ رحیمی، سهیل؛ جلالی، ناهیده. (1395). نقش مؤلفه‌های شخصیت در خود اثر بخشی دانشجویان رشته پزشکی. مطالعات آموزشی نما، (2)4، 29-22.
نادری، محمدعلی؛ سجادیان، ایلناز. (1389). مبانی روش تحقیق کاربردی در علوم انسانی، تهران. انتشارات دانشگاه آزاد اسلامی.
References
Amernic, J.H., Craig, R.J. (2010). Accounting as a facilitator of extreme narcissism. Journal of Business Ethics, 96(1), 79-93.
Ashton, M.C., Lee, K. (2005). Honesty‐humility, the big five, and the five‐factor model. Journal of Personality, 73(5), 1321-1354.
Ashton, M.C., Lee, K., Perugini, M., Szarota, P., De Vries, R.E., Di Blas, L., De Raad, B. (2004). A six-factor structure of personality-descriptive adjectives: Solutions from psycholexical studies in seven languages. Journal of Personality and Social Psychology, 86(2), 356-366.
Ashton, M.C., Lee, K., Son, C. (2000). Honesty as the sixth factor of personality: Correlations with Machiavellianism, primary psychopathy, and social adroitness. European Journal of Personality, 14(4), 359-368.
Ashton, M.C., Lee, K., Pozzebon, J.A., Visser, B.A., Worth, N.C. (2010). Status-driven risk taking and the major dimensions of personality. Journal of Research in Personality, 44(6), 734-737.
Bishop, C.C. (2013). The impact of social influence pressure on CFO judgments. Available at www.digitalcommons.kennesaw.edu.
Bishop, C.C., DeZoort, F.T., Hermanson, D.R. (2017). The effect of CEO social influence pressure and CFO accounting experience on CFO financial reporting decisions. Auditing: A Journal of Practice & Theory, 36(1), 21-41.
Blanchard, A.L., Welbourne, J., Gilmore, D., Bullock, A. (2009). Followership styles and employee attachment to the organization. The Psychologist-Manager Journal, 12(2), 111-131.
Brink, A.G., Gouldman, A., Victoravich, L.M. (2018). The effects of organizational risk appetite and social pressure on aggressive financial reporting behavior. Behavioral Research in Accounting, 30(2), 23-36.
Brink, A.G., Tang, F., Yang, L. (2014). The effects of social influence pressure source and reporting consequence on financial statement preparers' fair value estimate choices. International Journal of Behavioural Accounting and Finance, 6(2), 168-187.
Bruinsma, C., Wemmenhove, P. (2009). Tone at the top is vital! A delphi study. ISACA Journal, 3, 1-4.
Buttross, T.E., Schmelzle, G., Rao, H. (2011). Ethical decision making by management accountants: An empirical examination of obedience theory. Available at SSRN 1787613.
Can, A., Aktaş, M. (2012). Cultural values and followership style preferences. Procedia-Social and Behavioral Sciences, 41, 84-91.
Cialdini, R.B., Goldstein, N.J. (2004). Social influence: Compliance and conformity. Annual Review of Psychology Journal, 55, 591-621.
Clayton, B.M., Van Staden, C.J. (2015). The impact of social influence pressure on the ethical decision making of professional accountants: Australian and New Zealand evidence. Australian Accounting Review, 25(4), 372-388.
Cohen, L., Manion, L., Morrison, K. (2000). Research methods in education. 5th Edition, Routledge Falmer, London.
Daft, R. (2008). The leadership experience (4th ed.). Mason, OH: Thomson.
Davis, S., DeZoort, F.T., Kopp, L.S. (2006). The effect of obedience pressure and perceived responsibility on mana/gement accountants' creation of budgetary slack. Behavioral Research in Accounting, 18(1), 19-35.
Delavar, A. (2017). Experimental designs in psychology and educational sciences.Tehran, Samt [In Persian].
Delavar, A. (2008). Research methodology in psychology and educational sciences. Tehran,Virayesh [In Persian].
DeZoort, F.T., Lord, A.T. (1994). An investigation of obedience pressure effects on auditors' judgments. Behavioral Research in Accounting, 6(1), 1-30.
DeZoort, F.T., Lord, A.T. (1997). A review and synthesis of pressure effects research in accounting. Journal of Accounting Literature, 16, 28-85.
Favara Jr, L.F. (2009). Putting followership on the map: Examining followership styles and their relationship with job satisfaction and job performance. Journal of Business & Leadership: Research, Practice, and Teaching, 5(2), 68-77.
Gharaghani, M., Nasiri, F. (2015). The role of risk appetite in implementing organizational risk management. 12th International Conference on Industrial Engineering. Kharazmi University [In Persian].
Hilbig, B.E., Zettler, I. (2009). Pillars of cooperation: Honesty–humility, social value orientations, and economic behavior. Journal of Research in Personality, 43(3), 516-519.
Hilbig, B.E., Zettler, I., Leist, F., Heydasch, T. (2013). It takes two: Honesty–humility and agreeableness differentially predict active versus reactive cooperation. Personality and Individual Differences, 54(5), 598-603.
Izraeli, D. (1988). Ethical beliefs and behavior among managers: A cross-cultural perspective. Journal of Business Ethics, 7(4), 263-271.
Kelley, R.E. (2008). Rethinking followership. In R.E. Riggio, I. Chaleff & J.R. Lipman-Blumen (Eds.), The art of followership: How great followers create great leaders and organizations (pp.5-16). San Francisco: Jossey-Bass.
Kelley, R.E. (1998). Followership in a leadership world. Edited by L. Spears, Insights on leadership: Service, stewardship, spirit, and servant-leadership. New York, NY: John Wiley & Sons, Inc.
Lee, C. (1991). Followership: The essence of leadership. Training, 28(1), 27-35.
Lee, K., Ashton, M.C., Morrison, D.L., Cordery, J., Dunlop, P.D. (2008). Predicting integrity with the HEXACO personality model: Use of self and observer reports. Journal of Occupational and Organizational Psychology, 81(1), 147-167.
Lord, A.T., DeZoort, F.T. (2001). The impact of commitment and moral reasoning on auditors' responses to social influence pressure. Accounting, Organizations and Society, 26(3), 215-235.
McCafferty, J. (2004). Extreme makeover. CFO Magazine, July: 46–51.
McLean, B., Elkind, P. (2003). The smartest guys in the room: The amazing rise and scandalous fall of enron. New York, NY: Portfolio Trade.
Milgram, S. (1974). Obedience to authority: An experimental view, London: Tavistock publications.
Naderi, M., Sajadiyan, I. (2010). Fundamentals of applied research in the humanities. 1st ed, Tehran, Islamic Azad University Publishers [In Persian].
Naderi, H., Rahimi, S., Jalali, N. (2017). The role of personality components in self-efficacy of medical students. Journal of Educational Studies, 4(2), 22-29 [In Persian].
O’Fallon, M.J., Butterfield, K.D. (2005). A review of the empirical ethical decision-making literature: 1996–2003. Journal of Business Ethics, 59(4), 375-413.
Oh, I.S., Lee, K, Ashton, M.C., de Vries, R.E. (2011). Are dishonest extraverts more harmful than dishonest introverts? The interaction effects of honesty-humility and extraversion in predicting workplace deviance. Applied Psychology, 60(3), 496-516.
Otley, D.T., Pierce, B.J. (1996). The operation of control systems in large audit firms. Auditing, A Journal of Practice & Theory, 15(2), 65-84.
Ramamoorti, S. (2008). The psychology and sociology of fraud: Integrating the behavioral sciences component into fraud and forensic accounting curricula. Issues in Accounting Education, 23(4), 521-533.
Rezaee, A. (2015). A step-by-step guide to analyzing data using the program SPSS. Tehran, Frozesh [In Persian].
Rezazadeh, J., Bakeshloo, A. (2014). Aggressive financial reporting and stock price awareness. Applied Research in Financial Reporting, 5(3), 7-22 [In Persian].
Rittenberg, L., Martens, F. (2012). Enterprise risk management: understanding and communicating risk appetite. The Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Shafer, W.E. (2002). Effects of materiality, risk, and ethical perceptions on fraudulent reporting by financial executives. Journal of Business Ethics, 38(3), 243-262.
Tett, R.P., Burnett, D.D. (2003). A personality trait-based interactionist model of job performance. Journal of Applied Psychology, 80, 587-606.
Wiltshire, J., Bourdage, J.S., Lee, K. (2014). Honesty-humility and perceptions of organizational politics in predicting workplace outcomes. Journal of Business and Psychology, 29(2), 235-251.
Zey-Ferrell, M., Weaver, K.M., Ferrell, O.C. (1979). Predicting unethical behavior among marketing practitioners. Human Relations, 32(7), 557-569.

Files

History

  • Receive Date: 26 April 2020
  • Revise Date: 08 August 2020
  • Accept Date: 02 November 2020

Share

How to cite

Statistics