The effects of using process accountability and outcome accountability on susceptibility to directional goals: an examination of management's memory in financial reporting

Abstract

Managers are often held accountable for either or both the decision outcome and the decision process, with implications for the influence of motivated reasoning in their judgments and decisions. I review these implications in the context of managers’ memory for the source of information. Integrating psychology theory, I examine how the type of accountability (outcome or process) interacts with managers’ situational preferences to influence management’s accuracy and confidence in its memory for the source of information. In the experiment, participants assume the role of managers and review evidence—preference-consistent and preference-inconsistent—regarding a potential environmental liability provided by both a more reliable source and a less reliable source. Compared to process-accountable participants, outcome-accountable participants: 1) make less accurate source attributions, 2) report a greater difference in confidence between preference-consistent and preference-inconsistent source attributions, and 3) display lower confidence calibration for preference-consistent source attributions. When participants are held accountable for both decision process and decision outcome, they display lower source attribution accuracy and calibration compared to participants accountable only for the decision process. My dissertation contributes to our understanding of the relation between motivated reasoning and memory, and suggests accountability affects managers’ objectivity in financial reporting.