Past literature has highlighted the importance of using reviewers in the evaluation of investment proposals. This study examines whether and how the decisions of these reviewers are influenced by a proposal’s conformance with company guidelines and practices, and the incentives facing the proposal preparer. Our experiment shows that, holding the proposal’s content constant, the reviewers’ evaluation decision is less favourable if the proposal does not follow the company guidelines. Further, we find that the preparer’s incentive to persist in a project negatively affects the proposal reviewers’ decisions only when the proposal deviates from company guidelines but not when it is compliant. This result suggests that company guidelines may lower the willingness of reviewers to make independent decisions.
AdlerPSBorysB (1996) Two types of bureaucracy: enabling and coercive. Administrative Science Quarterly41: 61–89.
2.
AgnewR (1992) Foundation for a general strain theory of crime and delinquency. Criminology30: 47–87.
3.
AhrensTChapmanCS (2004) Accounting for flexibility and efficiency: a field study of management control systems in a restaurant chain. Contemporary Accounting Research21: 275–301.
4.
AlgeBBallingerGTangiralaSOakleyJ (2006) Information privacy in organizations: empowering creative and extrarole performance. Journal of Applied Psychology91: 221–232.
BicchieriCXiaoE (2009) Do the right things; but only if others do so. Journal of Behavioural Decision Making22: 191–208.
7.
BoothPSchulzAK-D (2004) The impact of an ethical environment on managers’ project evaluation judgments under agency problem conditions. Accounting, Organizations and Society29: 473–488.
8.
BoyleGGuthrieG (2006) Payback without apology. Accounting and Finance46: 1–10
9.
BraggS (2007) The New CFO Financial Leadership Manual, 2nd ed.Hoboken, NJ: John Wiley and Sons, Inc.
10.
BromileyP (1986) Corporate planning and capital investment. Journal of Economic Behaviour and Organization7: 147–170.
11.
BrownCSolomonI (1987a) Effects of outcome information on evaluations of managerial decisions. The Accounting Review62: 564–577.
12.
BrownCSolomonI (1987b) An experimental investigation of explanations for outcome effects on appraisals of capital-budgeting decisions. Contemporary Accounting Research10: 83–111.
13.
BucklessFARavencroftSP (1990) Contrast coding: a refinement of ANOVA in behavioral analysis. The Accounting Review65: 933–945.
14.
ChenS (2008) DCF techniques and nonfinancial measures in capital budgeting: a contingency approach analysis. Behavioral Research in Accounting20: 13–29.
15.
CialdiniRBGoldsteinNJ (2004) Social influence: compliance and conformity. Annual Review of Psychology55: 591–621.
16.
CialdiniRRenoRRKallgrenCA (1990) A focus theory of normative conduct: recycling the concept of norms to reduce littering in public places. Journal of Personality and Social Psychology58: 1015–1026.
17.
CovaleskiMADirsmithMWMichelmanJE (1993) An institutional theory perspective on the DRG framework, case-mix accounting systems and health-care organizations. Accounting, Organizations and Society18: 65–80.
18.
DavisJHechtGPerkinsD (2003) Social behaviours, enforcement, and tax compliance dynamics. The Accounting Review78: 39–69.
19.
De VilliersCvan StadenCJ (2006) Can less environmental disclosure have a legitimising effect? Evidence from Africa. Accounting, Organizations and Society31: 763–781.
20.
DeeganCRankinMTobinJ (2002) An examination of the corporate social and environmental disclosures of BHP from 1983–1997: A test of legitimacy theory. Accounting, Auditing and Accountability Journal15: 312–344.
21.
DenisonC (2009) Real options and escalation of commitment: a behavioral analysis of capital investment decisions. The Accounting Review84: 13315.
22.
DeZoortTHoustonRPetersM (2001) The impact of internal auditor compensation and role on external auditors’ planning judgements and decision. Contemporary Accounting Research18: 257–281.
23.
DikolliSMcCrackenSWalawskiJ (2004) Auditing-planning judgements and client-employee compensation contracts. Behavioural Research in Accounting16: 45–61.
24.
DrakeARHakaSF (2008) Does ABC information exacerbate hold-up problems in buyer-supplier negotiations?. The Accounting Review83: 29–60.
25.
FestingerLA (1957) A Theory of Cognitive Dissonance. Stanford, CA: Stanford University Press.
26.
GoldsteinNJGriskeviciusVCialdiniRB (2007) Invoking social norms: a social psychology perspective on improving hotels’ linen-reuse programs. Cornell Hotel and Restaurant Administration Quarterly48: 145–150.
27.
GoodingRKinickiA (1995) Interpreting event causes: the complementary role of categorization and attribution processes. Journal of Management Studies32: 1–22.
28.
GorelikG (1994) The setting of accounting standards: Canada, The United Kingdom, and the United States. International Journal of Accounting29: 95–122.
29.
GuildingC (2003) Hotel owner/operator structures: implications for capital budgeting process. Management Accounting Research14: 179–199.
30.
HaniffaRCookeT (2005) The impact of culture and governance on corporate social reporting. Journal of Accounting and Public Policy24: 391–430.
31.
HarrisonPHarrellA (1993) Impact of “adverse selection” on managers’ project evaluation decision. Academy of Management Journal36: 635–643.
32.
HeathC (1999) On the social psychology of agency relationships: lay theories of motivation overemphasise extrinsic incentives. Organizational Behaviour and Human Decision Processes78: 25–62.
33.
HealyMIlesJ (2002) The establishment and enforcement of codes. Journal of Business Ethics39: 117–124.
34.
HeiderF (1944) Social perception and phenomenal causality. Psychological Review51: 358–374.
35.
HeiderF (1958) The Psychology Of Interpersonal Relations. New York: Wiley.
36.
HoJVera-MunozC (2001) Opportunism in capital budget recommendations: the effects of past performance and its attributions. Decision Science32: 473–497.
37.
HumphreysKATrotmanKT (forthcoming) The balanced scorecard: the effect of strategy information on performance evaluation judgments. Journal of Management Accounting Research.
38.
KadousK (2000) The effects of audit quality and consequence severity on juror evaluations of auditor responsibility for plaintiffs losses. The Accounting Review75: 327–341.
39.
KadousKSedorL (2004) The efficacy of third-party consultation in preventing managerial escalation of commitment: the role of mental representation. Contemporary Accounting Research21: 55–82.
40.
KadousKKoonceLTowryK (2005) Quantification and persuasion in managerial judgement. Contemporary Accounting Research22: 643–686.
41.
KeilM (1995) Pulling the plug: software project management and the problem of project escalation. MIS Quarterly14: 421–447.
42.
KelleyH (1973) The processes of causal attribution. American Psychologist28: 107–128.
43.
KidaTMorenoKSmithJ (2001) The influence of affect on managers’ capital-budgeting decisions. Contemporary Accounting Research18: 477–494.
44.
KirchlerENiemirowskiAWearingA (2006) Shared subjective views, intent to cooperate and tax compliance: similarities between Australian taxpayers and tax officers. Journal of Economic Psychology27: 502–517.
45.
LangleyA (1990) Patterns in the use of formal analysis in strategic decisions. Organization Studies11: 17–45.
46.
LipeM (1991) Counterfactual reasoning as a framework of attribution theories. Psychological Bulletin109: 456–471.
47.
LipeMGSalterioSE (2000) The balanced scorecard: judgmental effects of common and unique performance measures. The Accounting Review75: 283–298.
48.
MainesLASalamonGLSprinkleG.B (2006) An information economic perspective on experimental research in accounting. Behavioral Research in Accounting18: 85–102.
49.
MorenoKKidaTSmithJ (2002) The impact of affective reactions on risky decision making in accounting contexts. Journal of Accounting Research40: 1331–1349.
50.
NautaR (1988) Task performance and attributional biases in the Ministry. Journal for the Scientific Study of Religion27: 609–620.
51.
O’BrienLTCrandallC (2005) Perceiving self-interest: power, ideology, and maintenance of the Status Quo. Social Justice Research18: 1–24.
52.
PowerM (2003) Auditing and the production of legitimacy. Accounting, Organizations and Society28: 379–394.
53.
RossJStawB (1993) Organizational escalation and exit: lessons from the Shoreham Nuclear Power Plant. Academy of Management Journal36: 701–732.
54.
RutledgeRHarrellA (1994) The impact of responsibility and framing of budgeting information on group-shifts. Behavioural Research in Accounting6: 92–109.
55.
RutledgeRKarimK (1999) The influence of self-interest and ethical considerations on managers’ evaluation judgments. Accounting, Organizations and Society24: 173–181.
56.
SawersK (2005) Evidence of choice avoidance in capital-investment judgements. Contemporary Accounting Research22: 1063–1092.
57.
SedorLM (2002) An explanation for unintentional optimism in analysts’ earnings forecasts. The Accounting Review77: 731–753.
58.
SchulzAChengMM (2002) Persistence in capital budgeting reinvestment decision – personal responsibility antecedent and information asymmetry moderator: a note. Accounting and Finance42: 73–86.
59.
SegelodE (1997) The content and role of the investment manual—a research note. Management Accounting Research8: 221–231.
60.
SlagmulderR (1997) Using management control system to achieve alignment between strategic investment decision and strategy. Management Accounting Research8: 103–139.
61.
SprinkleGB (2003) Perspectives on experimental research in managerial accounting. Accounting, Organizations and Society28: 287–318.
62.
StawBM (1976) Knee-deep in big muddy: a study of escalating commitment to a chosen course of action. Organizational Behavior and Human Decision Performance16: 27–44.
63.
StawBRossJ (1987) Knowing when to pull the plug. Harvard Business Review65: 68–74.
64.
StrubeMJBobkoP (1989) Testing hypotheses about ordinal interactions: Simulations and Further Comments. Journal of Applied Psychology74: 247–252.
65.
SuchmanM (1995) Managing legitimacy: strategic and institutional approaches. The Academy of Management Review20: 571–610.
66.
SwainMHakaS (2000) Effects of information load on capital budgeting decisions. Behavioural Research in Accounting12: 171–198.
67.
TaylerWBBloomfieldRJ (2011) Norms, conformity, and controls. Journal of Accounting Research49(3): 753–790.
68.
TruongGPartingtonGPeatM (2008) Cost of capital estimation and capital-budgeting practice in Australia. Australian Journal of Management33: 95–121.
69.
TylerT (2006) Psychological perspectives on legitimacy and legitimation. Annual Review of Psychology57: 375–400.
70.
TylerTBladerS (2005) Can businesses effectively regulate employee conduct? The antecedents of rule following in work settings. Academy of Management Journal48: 1143–1158.
71.
VerbeetenF (2006) Do organisations adopt sophisticated capital budgeting practices to deal with uncertainty in the investment decision? A research note. Management Accounting Research17: 106–120.
72.
WagnerJAIIIGoodingRZ (1997) Equivocal information and attribution: an investigation of patterns of managerial sensemaking. Strategic Management Journal18: 275–286.
