Motivating Effortful Information Acquisition and Honest Reporting: The Effect Of Input, Output and Hybrid Control

Using two experiments, we examine how two aspects of the information acquisition process – whether acquiring information is effortful and whether managers have discretion over information acquisition – affect managers’ subsequent reporting behavior, and the effectiveness of controls in influencing managers’ information acquisition and reporting behavior. In both experiments, subjects act as managers who submit funding requests to the firm owner. In Experiment 1, we find effortful information acquisition leads to less misreporting when managers have discretion, but this is less so the case when managers do not have discretion. Process analysis indicates managers’ sense of responsibility plays an important role in their information acquisition and reporting decisions. However, while effortful information acquisition leads to less misreporting when managers have discretion, these managers are also least likely to acquire information in the first place. Thus, in Experiment 2, we introduce controls and compare the effects of controls targeting either the information acquisition decision (input control), the subsequent reporting decision (output control), or both (hybrid control). All three controls motivate managers with discretion to acquire information more often, which leads to less misreporting. Interestingly, we find minimal evidence to suggest the hybrid control is more effective than either the input or output control.