Effects of the management control system in unethical behaviors

Klein, Luciana; Beuren, Ilse Maria; Dal Vesco, Delci

doi:10.1108/RAUSP-06-2018-0036

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Sumário

Research Paper • RAUSP 54 (1) • Jan-Mar 2019 • https://doi.org/10.1108/RAUSP-06-2018-0036 copy

Effects of the management control system in unethical behaviors

Authorship SCIMAGO INSTITUTIONS RANKINGS

Purpose

This study investigates which dimensions of the management control system (MCS) increase the perception of organizational justice and reduce unethical behavior in the perception of managers. The purpose of this paper is to validate the theoretical model of the study of Langevin and Mendoza (2012Langevin, P. and Mendoza, C. (2012), “How can management control system fairness reduce managers’ unethical behaviours?”, European Management Journal, Vol. 31 No. 3, pp. 209-222.), testing the theoretical hypotheses formulated by the authors.

Design/methodology/approach

A survey was performed in companies listed among the Best and Largest of Exame Magazine, and the sample is composed of 102 respondents of the research, which consists of 41 assertions.

Findings

The results of the structural equation modeling show that the definition of objectives increases the perception of procedural justice, but the same was not observed regarding the remuneration of the managers. Likewise, disregarding aspects that are uncontrollable by managers in performance evaluation does not lead to the perception of procedural and distributive justice. However, feedback quality leads to the understanding that the MCS is fair. Perception of procedural and distributive justice was also observed in the use of multiple measures of performance by the company.

Research limitations/implications

Other factors that have not been investigated may interfere with and contribute to the reduction of unethical behavior (budget slack and data manipulation).

Originality/value

The only variable that interferes in the reduction of unethical behavior is feedback quality. The non-confirmation of all the hypotheses instigates the replication of the research in other contexts for empirical validation of the theoretical model of Langevin and Mendoza (2012Langevin, P. and Mendoza, C. (2012), “How can management control system fairness reduce managers’ unethical behaviours?”, European Management Journal, Vol. 31 No. 3, pp. 209-222.).

Keywords
Organizational justice; Budgetary slack; Data manipulation; Management control system; Unethical behaviors

Hypotheses	Description
H1a	Participation in setting objectives increases the procedural justice perceived in MCS
H1b	Participation in setting objectives increases the perceived distributive justice in MCS
H2a	Application of the controllability principle increases the perceived distributive justice in MCS
H2b	Application of the controllability principle increases the procedural justice perceived in MCS
H3a	Quality of feedback increases the procedural justice perceived in MCS
H3b	Quality of feedback enhances perceived interactional justice in MCS
H4a	Use of multiple non-financial performance indicators increases the perceived distributive justice in MCS
H4b	Use of multiple non-financial performance indicators increases the procedural justice perceived in MCS
H5a	Organizational justice perceived in MCS reduces the propensity to create budgetary slack with increased organizational commitment
H5b	Organizational justice perceived in MCS reduces the propensity to manipulate data with increased organizational commitment
H6a	Organizational justice perceived in MCS reduces the propensity to create budgetary slack with increasing trust in the superior
H6b	Perceived organizational justice in MCS reduces the propensity to manipulate data with increased trust in the superior

Variables	Questions used from previous studies	Original scale^*
Organizational justice	From Rego’s (2002)Rego, A. (2002), “Comprometimento afectivo dos membros organizacionais: o papel das percepções de justiça”, Revista de Administração Contemporânea, Vol. 6 No. 2, pp. 209-241. questionnaire, for organizational justice, only three of the 17 assertions regarding the distributive justice of tasks were used (15 to 17)	Likert of 6 points (1 = strongly disagree and 6 = strongly agree)
Organizational Commitment	From Rego’s (2002)Rego, A. (2002), “Comprometimento afectivo dos membros organizacionais: o papel das percepções de justiça”, Revista de Administração Contemporânea, Vol. 6 No. 2, pp. 209-241. questionnaire, for organizational commitment, all (three) assertions were used	Likert of 6 points (1 = strongly disagree and 6 = strongly agree)
Trust in the superior	From Hartmann and Slapnicar’s (2009Hartmann, F. and Slapnicar, S. (2009), “How formal performance evaluation affects trust between superior and subordinate managers”, Accounting, Organization and Society, Vol. 34 Nos 6/7, pp. 722-737. questionnaire), for trust in the superior, all (three) the assertions of question 7 were used	Likert 5 points (1 = totally disagree and 5 = totally agree)
Budgetary slack	From Dunk’s (1993)Dunk, A.S. (1993), “The effect of budget emphasis and information asymmetry on the relation between budgetary participation and slack”, The Accounting Review, Vol. 68 No. 2, pp. 400-410. questionnaire, from the set of six assertions related to budgetary slack, the three that were not reverse-scaled were used	Likert 7 points (1 = totally disagree and 7 = totally agree)
Data manipulation	From Dunk’s (1993)Dunk, A.S. (1993), “The effect of budget emphasis and information asymmetry on the relation between budgetary participation and slack”, The Accounting Review, Vol. 68 No. 2, pp. 400-410. questionnaire, from the set of six assertions related to information asymmetry, the three most pertinent to the possible manipulations of the data were used	Likert of 7 points (1 = My superior … much better … and 7 = Me … much better …)
Setting objectives	From López, Stammerjohan, and McNair’s (2007)López, M.A.L., Stammerjohan, W.W. and Mcnair, F.M. (2007), “Differences in the role of job-relevant information in the budget participation-performance relationship among US and Mexican managers: a question of culture or communication”, Journal of Management Accounting Research, Vol. 19 No. 1, pp. 105-136. questionnaire, four of the six assertions of the question about budgetary participation were used, replacing the term budget with goals and objectives	Likert 7 points (1 = totally disagree and 7 = totally agree)
Controllability principle	From Burkert, Fischer and Schäffer’s (2011)Burkert, M., Fischer, F.M. and Schäffer, U. (2011), “Application of the controllability principle and managerial performance: the role of role perceptions”, Management Accounting Research, Vol. 22 No. 3, pp. 143-159. questionnaire, the first three assertions concerning the Controllability Principle were used	Likert of 7 points (1 = a little and 7 = totally)
Multiple measures of performance	The first assertion about multiple performance measures was based on Widener’s (2006)Widener, S.K. (2006), “Human Capital, pay structure, and the use of performance measures in bonus compensation”, Management Accounting Research, Vol. 17 No. 2, pp. 198-221. study. One assertion from Hartmann and Slapnicar’s (2009)Hartmann, F. and Slapnicar, S. (2009), “How formal performance evaluation affects trust between superior and subordinate managers”, Accounting, Organization and Society, Vol. 34 Nos 6/7, pp. 722-737. questionnaire was used. The other two assertions were based on Langevin and Mendoza’s (2012)Langevin, P. and Mendoza, C. (2012), “How can management control system fairness reduce managers’ unethical behaviours?”, European Management Journal, Vol. 31 No. 3, pp. 209-222. study	Likert 7 points (1 = totally disagree and 7 = totally agree)
Quality of feedback	The four assertions of question 5 from Hartmann and Slapnicar’s (2009)Hartmann, F. and Slapnicar, S. (2009), “How formal performance evaluation affects trust between superior and subordinate managers”, Accounting, Organization and Society, Vol. 34 Nos 6/7, pp. 722-737. questionnaire were used for the quality of feedback	Likert 5 points (1 = totally disagree and 5 = totally agree)

Variables	Minimum	Maximum	Median	Mode	Mean	SD
Distributive justice	1	7	5	5	4.58	1.57
Procedural justice	1	7	4	4	4.12	1.79
Interactional justice	1	7	5	6	4.84	1.68
Organizational commitment	1	7	6	7	5.39	1.66
Trust in the superior	1	7	4	4	4.36	1.64
Budgetary slack	1	7	5	4	4.37	1.75
Data Manipulation	1	7	5	6	5.03	1.48
Setting objectives	1	7	5	6	4.91	1.59
Controllability principle	1	7	3	5	3.48	1,64
Quality of Feedback	1	7	4	5	4.53	2.02
Multiple measures of performance	1	7	5	7	3.89	1.86

Constructs	AVE	ComposedReliability	R ²	Cronbach’sAlpha	Communality	Redundancy
Commitment	0.885	0.958	0.466	0.935	0.885	0.188
Trust	0.851	0.945	0.661	0.912	0.851	0.198
Setting objectives	0.610	0.860	0.000	0.798	0.610	0.000
Budgetary slack	0.432	0.673	0.316	0.560	0.432	0.043
Distributive justice	0.849	0.965	0.299	0.955	0.849	0.094
Interactional justice	0.800	0.960	0.437	0.950	0.800	0.349
Procedural justice	0.789	0.918	0.541	0.867	0.789	0.236
Data manipulation	0.900	0.964	0.162	0.944	0.900	−0.082
Multiple measures of performance	0.534	0.772	0.000	0.576	0.534	0.000
Controllability principle	0.361	0.485	0.000	0.682	0.361	0.000
Quality of feedback	0.824	0.933	0.000	0.894	0.824	0.000

	Commit.	Trust	S. Obj.	Bud. Slack	Dist. Just.	Inter. Just.	Proc. Just.	Data Manip.	M.M.Perf.	Contr Princ.	Feedback
Commit.	0.958
Trust	0,601	0,945
S. Obj.	0.523	0.584	0.860
Bud. Slack	0.425	0.550	0.604	0.673
Dist. Just.	0.577	0.628	0.418	0.435	0.966
Inter. Just.	0.615	0.796	0.694	0.566	0.630	0.960
Proc. Just.	0.636	0.651	0.614	0.535	0.672	0.794	0.918
Data Manip.	0.014	−0.313	−0.041	−0.062	−0.131	−0.236	−0.201	0.964
M.M. Perf.	0.476	0.532	0.521	0.461	0.505	0.566	0.600	−0.110	0.772
Contr. Prin.	−0.296	−0.436	−0.474	−0.208	−0.326	−0.340	−0.285	−0.021	−0.337	0.485
Feedback	0.447	0.642	0.535	0.428	0.518	0.661	0.627	−0.239	0.586	−0.272	0.933

Structural relationship	Beta direct effect	t-Test	Hypothesis	p-value
S. Obj.→ Proc. Just.	0.334	3.407	H1a	0.000^**
S. Obj.→ Dist. Just.	0.163	1.483	H1b	0.138
Contr. Prin.→ Dist. Just.	−0.120	0.886	H2a	0.376
Contr. Prin.→ Proc. Just.	0.045	0.566	H2b	0.571
Feedback → Proc. Just.	0.306	3.210	H3a	0.001^**
Feedback → Inter. Just.	0.661	10.290	H3b	0.000^**
M.M. Perf.→ Dist. Just.	0.380	3.814	H4a	0.000^**
M.M. Perf .→ Proc. Just.	0.261	2.902	H4b	0.003^**

Structural relationship	Indirecteffect	t-Test	Hypothesis	p-value
Distributive justice → Data manipulation	−0.040	0.589	H5b and H6b	0.557
Procedural justice → Budgetary slack	0.018	0.260	H5a and H6a	0.795
Procedural justice → Data manipulation	0.120	1.588	H5b and H6b	0.113
Distributive justice → Budgetary slack	0.138	2.009	H5a and H6a	0.045
Interactional justice → Budgetary slack	0.357	3.933	H5a and H6a	0.000
Interactional justice → Data manipulation	−0.275	2.715	H5b and H6b	0.007
Setting objectives → Organizational commitment	0.136	1.927	H5a and H6a	0.055
Setting objectives → Trust in the superior	0.019	0.400	H5b and H6b	0.689
Setting objectives → Budgetary slack	0.029	0.990	H5a and H6a	0.323
Setting objectives → Data Manipulation	0.033	1.193	H5b and H6b	0.234
M.M. of Performance → Trust in the superior	0.071	1.400	H5b and H6b	0.162
M.M. of Performance → Budgetary slack	0.057	1.648	H5a and H6a	0.100
M.M. of Performance → Data manipulation	0.016	0.540	H5b and H6b	0.590
Controllability principle → Organizational commitment	−0.015	0.260	H5a and H6a	0.795
Controllability principle → Trust in the superior	−0.030	0.826	H5b and H6b	0.409
Controllability principle → Budgetary slack	−0.016	0.664	H5a and H6a	0.507
Controllability principle → Data manipulation	0.010	0.623	H5b and H6b	0.534
M.M. of Performance → Organizational commitment	0.164	2.743	H5a and H6a	0.006
Quality of feedback → Organizational commitment	0.247	2.608	H5a and H6a	0.010
Quality of feedback → Trust in the superior	0.444	4.960	H5b and H6b	0.000
Quality of feedback → Budgetary slack	0.241	3.722	H5a and H6a	0.000
Quality of feedback → Data manipulation	−0.145	2.190	H5b and H6b	0.029

Structural relationship	Beta TotalEffect Total	t Test	Hypothesis	P-value
Distributive j. → Commitment	0.231	1.669	H5a and H5b	0.095
Procedural j. → Commitment	0.292	2.041	H5a and H5b	0.041^*
Interactional j.→ Commitment	0.238	1.652	H5a and H5b	0.099
Commitment → Budgetary slack	0.148	1.112	H5a	0.266
Commitment → Data manipulation	0.316	2.806	H5b	0.005^**
Distributive j. → Trust in the superior	0.225	2.055	H6a and H6b	0.040^*
Procedural j. → Trust in the superior	−0.054	0.500	H6a and H6b	0.617
Interactional j. → Trust in the superior	0.697	6.104	H6a and H6b	0.000^**
Trust → Budgetary slack	0.461	3.512	H6a	0.000^**
Trust → Data manipulation	−0.503	4.107	H6b	0.000^**
S. objectives → Budgetary slack	0.029	0.966	H5a and H6a	0.334
S. objectives → Data manipulation	0.033	1.126	H5b and H6b	0.260
M.M. of performance → Budgetary slack	0.057	1.621	H5a and H6a	0.105
M.M. of performance → Data manipulation	0.016	0.506	H5b and H6b	0.613
Controllability P. → Budgetary slack	−0.016	0.669	H5a and H6a	0.504
Controllability P. → Data manipulation	0.010	0.613	H5b and H6b	0.540
Q. of Feedback → Budgetary slack	0.241	3.611	H5a and H6a	0.000^**
Q. of Feedback → Data manipulation	−0.145	2.293	H5b and H6b	0.022^*

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[1] *Corresponding author Ilse Maria Beuren can be contacted at: ilse.beuren@gmail.comAssociate editor: Maria Sylvia Macchione Saes