Research by Boster and James Explores Relationship between Personality Traits and Budget Reporting Accuracy

Accurate financial information is vital to the functioning of modern financial systems. Various stakeholders rely on accurate financial reporting in their interactions with businesses. Without accurate, honest, and timely financial reporting trust is eroded and overall market stability is undermined. New research by Turner College accounting professor Charles Boster, Nicholas Busko of Worcester Preparatory School, Turner College management professor Mark James and Towson University's Micheal Schuldt employs a principal agent framework to examine agent reporting accuracy in a budgeting context. In developing some testable hypotheses in this regard, the authors state that an interesting question is why individuals do not maximize their financial utility and engage in opportunistic behavior despite incentives to do so. As their study, which is set to appear in the Journal of Business and Economics, explains, "It may be that individuals weigh not only the material cost and benefits of opportunistic behavior but also behaviors’ psychological costs. From a psychological perspective, dishonesty creates emotional and or mental discomfort, which individuals weigh against the material gains of opportunistic behaviors. Additionally, individuals may avoid opportunistic behaviors as a self-concept maintenance strategy, which suggests individuals limit opportunistic behaviors to preserve a positive moral self-image." Here, the researchers add that findings from prior research suggest that personality traits can influence ethical decision-making in workplace settings, including participative budgeting environments where individuals report private information. Once such workplace setting that could alter decision making is the nature of the compensation system.

To examine the association between honesty-humility and conscientiousness on the one hand, and opportunistic behavior in budget reporting on the other hand, the researchers utilized information gathered from a set of trust-based contract experiments completed by 162 students at a liberal arts institution in the mid-Atlantic region. Analysis of the information gathered from the experiments reveals some support for the notion that honest participants (i.e., those with higher honesty scores) more accurately report budget information than less honest participants (i.e., those with lower honesty scores). Among other results, more agreeable participants report with lower accuracy than less agreeable participants, and more altruistic participants report with greater accuracy than less altruistic participants. Boster, James et al. conclude their study by pointing out that it extends the managerial accounting and psychology literature stream by underscoring the influence of situations as moderators of personality effects. While general personality assessments can predict behaviors over a wide variety of contexts, specific behaviors are strongly influenced by situational demands. Lastly, their study provides evidence that personality measures and situational factors influence reporting choices in the participative budgeting paradigm.