Rotten Apples and Sterling Examples: Moral Reasoning and Peer Influences on Honesty in Managerial Reporting

We examine how observing a sequence of peers’ actions affects one’s own actions, and how such social influences depend on moral reasoning. In a budget reporting experiment, subjects become less honest after seeing a less honest peer and more honest after seeing a more honest peer, on average. Pre-conventional types, who are self-interested, decrease their honesty most; only conventional types, who strive to conform, increase their honesty. Because the reaction to less-honest peers is stronger and more pervasive, social influences erode honesty, on average. Results further suggest that sensitivity to external norms is correlated with internal standards.

This seminar is organised by the Erasmus Accounting Research Group