The Role of Narcissistic Hypocrisy in the Development of Accounting Estimates

In an experiment including experienced managers, we investigate how supervisor and subordinate narcissism influence a supervisor’s review of a subordinate’s accounting estimate. While narcissistic supervisors express greater liking for narcissistic subordinates (narcissistic tolerance), they nonetheless reject and revise the accounting estimates of narcissistic subordinates to a greater extent than they reject estimates of non‐narcissistic subordinates (narcissistic hypocrisy), even when doing so inhibits the supervisor’s ability to reach a profit target. Our findings contribute to extant research in accounting and psychology. We demonstrate that narcissistic hypocrisy extends beyond the evaluation of others and alters narcissists’ willingness to rely on other narcissists in a meaningful financial reporting decision. We also find that narcissistic hypocrisy is robust across age, gender, and supervisory experience.RÉSUMÉLe rôle de l’hypocrisie narcissique dans l’élaboration d’estimations comptablesLes auteurs mènent auprès de gestionnaires chevronnés une expérience visant à déterminer en quoi le narcissisme des supérieurs et des subalternes influe sur l’examen auquel les supérieurs soumettent les estimations comptables des subalternes. Bien que les supérieurs narcissiques semblent apprécier davantage les subalternes narcissiques (tolérance narcissique), ils rejettent et révisent néanmoins les estimations des subalternes narcissiques plus souvent qu’ils ne rejettent les estimations des subalternes non narcissiques (hypocrisie narcissique), même lorsque cette décision nuit à leur capacité d’atteindre un objectif de profit. Les résultats de l’étude viennent enrichir les recherches existantes en comptabilité et en psychologie. Les auteurs démontrent que l’hypocrisie narcissique s’étend au‐delà de l’évaluation d’autrui et modifie la mesure dans laquelle les narcissiques sont disposés à s’appuyer sur d’autres narcissiques dans une décision importante en matière d’information financière. Ils observent également que leurs conclusions quant à l’hypocrisie narcissique persistent quels que soient l’-ge, le sexe et l’expérience de supervision.Peer Reviewedhttps://deepblue.lib.umich.edu/bitstream/2027.42/155911/1/care12552-sup-0001-SupInfo.pdfhttps://deepblue.lib.umich.edu/bitstream/2027.42/155911/2/care12552.pdfhttps://deepblue.lib.umich.edu/bitstream/2027.42/155911/3/care12552_am.pd

Procurement of IT Consulting Services and Firm-Specific Characteristics

Information technology investments and the management consulting industry witnessed unprecedented growth in the last decade. This led to regulators\u27 (SEC and Congress) allegations that consulting services that are provided by incumbent auditors may be disguised extra payments to auditors for favorable financial reporting. However, there may be alternative valid reasons for procurement of consulting. Under new legislation (proclaimed in the aftermath of spectacular failures like Enron and Worldcom), publicly traded corporations that engage professional services firms to provide both audit services and consulting services must now disclose the extent and nature of these services. Using the data made available by these new mandated disclosures and using the theoretical backdrop of the resource-based view (RBV), this paper examines whether investments by firms in consulting services follow predictable patterns driven by economic factors. Thus, rather than examine whether IT consulting has any ex-post value or whether procurement of consulting impairs auditor independence, this study focuses on whether investments, ex-ante, follow logical patterns consistent with microeconomic principles. Our analysis shows that procurement of IT and management consulting is consistent with the resource-based view -companies seek to develop organizational capabilities they lack as dictated by their strategic business need. In contrast to the narrow IT Doesn\u27t Matter view, it can be argued that even in the current environment of IT outsourcing, firms must carefully match their IT capability (in-house or outsourced) with organizational strategy and capability to develop unique and inimitable resources as put forth by RBV. We find that companies are indeed investing consistent with fundamental tenets of financial value analysis and based on market expectations of performance. More specifically, after controlling for pressure to perform and cash availability, low margin and low turnover companies spend more on consulting services. Low-margin strategy companies expend more on consulting when their asset turnover is also low, while low-turnover strategy companies expend more on consulting when their earnings margin is also low