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INCENTIVES FOR DISHONESTY: AN EXPERIMENTAL STUDY WITH INTERNAL AUDITORS
Author(s) -
Balafoutas Loukas,
Czermak Simon,
Eulerich Marc,
Fornwagner Helena
Publication year - 2020
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/ecin.12878
Subject(s) - incentive , dishonesty , audit , replicate , sample (material) , cheating , compensation (psychology) , business , accounting , honesty , psychology , social psychology , microeconomics , economics , statistics , chemistry , mathematics , chromatography
We conduct an experiment with professional internal auditors and evaluate their performance and objectivity, measured as the extent to which they truthfully report the performance of other participants in a real‐effort task. In line with our hypotheses, we find that incentive‐based compensation increases dishonest behavior: competitive incentives lead to under‐reporting of other participants' performance, while collective incentives lead to over‐reporting of performance. We replicate these results with a student sample. In addition, we find that moving from an environment with objective performance evaluation toward a peer evaluation scheme reduces performance among internal auditors, but not among students.( JEL C93, M42, M52)