Working Paper: CEPR ID: DP9880
Authors: Rajna Gibson; Carmen Tanner; Alexander F. Wagner
Abstract: Social norms can act as safeguards against corporate misconduct, but can also foster undesirable behavior. We conduct a laboratory experiment where we expose participants (in the role of CEOs) to social norms approving or disapproving of earnings management. There are systematic differences among individuals' reactions to the situational pressure. Specifically, individuals with strong preferences for truthfulness react less to both kinds of social norms. Self-signaling provides a convincing explanation of individual behavior. These findings have implications for the empirical analysis of managerial behavior and for the use of social norms as steering tools for corporate governance.
Keywords: crowding-out; honesty; norm conformity; protected values; self signaling; situational social norms
JEL Codes: C91; G02; G30; M14
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| social norms (Z13) | managerial honesty (M14) |
| preferences for truthfulness (D91) | managerial honesty (M14) |
| strong preferences for truthfulness (D01) | susceptibility to social norms (C92) |
| disapproving norms (Z13) | truth-telling behavior (Z13) |
| approving norms (F55) | truth-telling behavior (Z13) |
| social norms + preferences for truthfulness (Z13) | managerial honesty (M14) |