The Effects of Organizational Risk Appetite and Social Pressure on Aggressive Financial Reporting Behavior

Abstract

This study uses an experiment to investigate how an organization's risk appetite statement (conservative versus aggressive) and source of social pressure (conformity pressure from a peer versus obedience pressure from a superior) combine to influence management accountants' aggressive financial reporting behavior. Specifically, we focus on whether social pressure arising from a superior relative to pressure from a peer may undermine a conservative risk appetite. We find that management accountants' aggressive financial reporting judgments are more responsive to obedience pressure relative to conformity pressure in the presence of a conservative risk appetite, which suggests that pressure from a superior may reduce the effectiveness of a conservative risk appetite. Our study contributes to understanding how factors at the individual, social, and organizational level combine to influence management accountants' aggressive financial reporting behavior. Data Availability: The data used in this study are available upon request from the authors.

Integrating Individual Factors to Construct Recognition Models of Consumer Fraud Victimization

“…In addition to the above main features, other potentially relevant features, such as risk appetite and subjective well-being, were also treated as model inputs. For example, participants’ risk appetite was considered an input in this study because risk appetite may influence an individual’s financial behavior [ 46 , 47 ]. The risk appetite was investigated by two questions (e.g., “Which of the choice below do you want to invest most if you have adequate money?” from 1 “project with high-risk and high-return” to 5 “unwilling to carry any risk”), and the answer to each question was used as an input feature.…”

The moderating role of financial managers’ honesty-humility on aggressive financial reporting: evidence from Iran

“…Conservative risk appetite seeks to achieve the company's operational goals by avoiding risk, whereas in aggressive risk appetite, the company's operational goals are pursued by accepting a high level of risk. In a company where risk taking is promoted to achieve the goals, the risk-taking behavior may lead to the acceptance of aggressive financial reporting, even when it is unethical while this behavior is less likely to occur in a company that has a conservative risk appetite (Brink et al, 2018). When the risk appetite statement is aggressive, despite the high-risk diagnosis, the natural tendency to engage in immoral actions is activated.…”

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Purpose -The purpose of this study is to investigate the moderating role of honesty-humility of financial managers on aggressive financial reporting behavior.Design/methodology/approach -To test the research hypotheses, a scenario-based questionnaire taken from Brink et al (2018) was used. Using a cross-sectional survey design, the authors collected primary data of 160 financial managers of firms in Iran using structured questionnaires.

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“…Design/methodology/approach -To test the research hypotheses, a scenario-based questionnaire taken from Brink et al (2018) was used. Using a cross-sectional survey design, the authors collected primary data of 160 financial managers of firms in Iran using structured questionnaires.…”

Fraudulent financial reporting motivations in emerging markets

“…Pressure from coercion, by jeopardizing an individual and his/her status or assets (e.g. threat by a superior to take legal action or dismissal) may motivate management to commit fraud and engage in fraudulent financial reporting (Rezaee, 2005; Boyle et al , 2015; Widhoyoko, 2017; Gupta, 2018; Amin, 2018; Brink et al , 2018). This pressure may be rooted in personal, external or environmental problems (Zuberi and Mzenzi, 2019).…”