The Impact of Social Influence Pressure on CFO Judgments

<p>Through an experiment, this study examines the influence of social influence pressure on the Chief Financial Officer’s (CFO’s) financial reporting decisions. Specifically, I evaluate the impact of inappropriate obedience and compliance pressure from the Chief Executive Officer (CEO) on the CFO’s propensity to make revisions to financial results in order to meet an earnings target. This study also examines how followership propensities and core self-evaluations (CSE) influence the pressure effects. This study complements and expands archival research examining why CFOs appear to participate in material accounting manipulations (Feng, Ge, Luo, & Shevlin, 2011; Ge, Matsumoto, & Zhang, 2011).</p> <p>The results of a between-subject experiment with 66 public company CFOs indicate that obedience and compliance pressure significantly increase CFOs’ willingness to revise their initial inventory adjustments in the direction preferred by the CEO. Although compliance pressure did not create perceived pressure in the CFOs, it generated an actual response (similar revision of the initial adjustment) similar to that under obedience pressure. Compliance pressure’s strength reveals that CEO power is effective even when soft tactics (i.e., requests) are utilized. The findings confirm the importance of the “tone at the top” in financial statement judgments. In addition, the findings reveal that effective followers, who independently evaluate leadership’s requests, were less likely to revise their initial adjustment. Finally, CFOs with more accounting experience were less likely to revise their initial adjustment. This study has implications for corporate governance mechanisms, including improving the effectiveness of CFOs as financial statement monitors and improving CFO independence to alleviate pressure from the CEO.</p>

Name thesis:degree_name

Doctor of Business Administration (DBA)

Level thesis:degree_level

Dissertation

Discipline thesis:degree_discipline

Accountancy

Year dc:date.available

2013

Author dc:creator

• Bishop, Carol C.

Contributors dc:contributor

• Dr. Dana Hermanson
• Dr. F. Todd DeZoort
• Dr. Zhongxia (Shelly) Ye

• financial statement fraud
• material accounting misstatement
• obedience pressure
• compliance pressure
• followership theory
• core self-evaluations
• Accounting

Repository record dc:identifier

https://digitalcommons.kennesaw.edu/etd/555

OAI identifier oai:identifier

oai:digitalcommons.kennesaw.edu:etd-1553