The Effect of Cognitive Moral Development on Honesty in Managerial Reporting

Journal of Business Ethics 145 (3):563-575 (2017)
  Copy   BIBTEX


This study examines whether truth-telling in the form of honest reporting is associated with cognitive moral development. Conventional agency theory assumes that people are self-interested and willing to tell a lie to increase their personal payoffs, while recent empirical evidence shows that some people give up monetary rewards to tell the truth. The social psychology literature suggests that cognitive moral development influences individuals’ ethical decisions. We carried out an experiment whereby participants submitted managerial reports in which truth-telling decreased their monetary payoff. Despite the fact that their decisions were not subject to monitoring, auditing, or reputation effects, some participants reported honestly or partially honestly. We find the relationship between honest reporting and cognitive moral development to be both positive and linear. Compared with those at lower stages of cognitive moral development, participants at higher stages of cognitive moral development were more likely to submit an honest report and give up potential monetary gains from lying. We further examine the economic impact of honest reporting on the firm’s profit. With the assumption of self-interest and profit maximization, Antle and Eppen suggest that a contract with a hurdle-rate feature reduces managers’ information rent. We find that in comparison with the expected outcome of a hurdle contract, the firm can yield higher profits with a trust contract by hiring managers with a P-score higher than 16.67.



    Upload a copy of this work     Papers currently archived: 91,088

External links

Setup an account with your affiliations in order to access resources via your University's proxy server

Through your library

Similar books and articles

O związkach między rozwojem poznawczym i rozumowaniem moralnym.Dorota CZYŻOWSKA - 2013 - Argument: Biannual Philosophical Journal 3 (1):27-36.
Honesty and Intimacy in Kant’s Duty of Friendship.R. Patricia C. Flynn - 2007 - International Philosophical Quarterly 47 (4):417-424.


Added to PP

22 (#626,746)

6 months
4 (#404,301)

Historical graph of downloads
How can I increase my downloads?