A selection of interesting articles we came across recently on “the love of money”.
Are you satisfied with your pay when you compare it?
According to Roberto Luna-Arocas and Thomas Li-Ping Tang, the answer depends on your love of money, pay comparison standards, and culture. The authors develop a theoretical model of income and pay comparison satisfaction with two mediators (love of money and pay comparison standards), examine the direct and the indirect paths of this model, and treat culture (the US vs. Spain) as a moderator.
Based on 311 professors in the US and Spain, they demonstrate a positive direct path and a negative indirect path. Subsequent multi-group analysis illustrates:
For American professors, their direct path shows that income is directly related to high pay comparison satisfaction. Their indirect path reveals the following new insights: Professors with high income have a strong love of money orientation, set their pay equity comparison standards (deserved pay and other’s salary) significantly higher than their own salary, and as a consequence, have low pay comparison satisfaction.
For Spanish professors, love of money is not related to their pay comparison standards, which are slightly (non-significantly) higher than their own self-reported income. Neither the direct nor the indirect path is significant. The standardized total effect of income to pay satisfaction is positive for American professors, but negligible for Spanish professors.
The results demonstrate that pay comparison satisfaction depends on not only one’s income but also one’s love of money and pay equity comparison standards which may vary across cultures.
Full details are in: Roberto Luna-Arocas and Thomas Li-Ping Tang. 2015. Are You Satisfied With Your Pay When You Compare? It Depends on Your Love of Money, Pay Comparison Standards, and Culture.
Journal of Business Ethics, 128(2), 279-289.
Is executive compensation related to corporate fraud in China?
Yes, according to a study investigating the relation between CEO compensation and corporate fraud in China. The authors document a significantly negative correlation between CEO compensation and corporate fraud using data on publicly traded firms between 2005 and 2010. Findings are consistent with the hypothesis that firms penalize CEOs for fraud by lowering their pay. They also find that CEO compensation is lower in firms that commit more severe frauds. Panel data fixed effects and propensity score methods are used to demonstrate these effects.
Results also indicate that corporate governance mechanisms influence the magnitude of punishment. CEOs of privately controlled firms, firms that split the posts of CEO and chairman, and CEOs of firms located in developed regions suffer larger compensation penalties for committing financial fraud. Finally, the authors show that CEOs at firms that commit fraud are more likely to be replaced compared to those at non-fraud firms.
Read further in: Martin J. Conyon and Lerong He. 2014. Executive Compensation and Corporate Fraud in China.
Journal of Business Ethics, December, 10.1007/s10551-014-2390-6.
Religion mitigates earnings management in China
Using a sample of 11,357 firm-year observations from the Chinese stock market for the period of 2001–2011, the authors investigate whether and how religion can mitigate earnings management. Specifically, based on geographic-proximity-based religion variables, they provide strong and robust evidence to show that religion is significantly negatively associated with the extent of earnings management, suggesting that religion can serve as a set of social norms to mitigate corporate unethical behavior such as earnings management.
Findings also reveal that the negative association between religion and earnings management is less pronounced for firms with closer distance to the regulatory centers than for their counterparts, implying the substitutive effects between religion and the distance to regulators (the proxy for regulatory intensity) on mitigating earnings management. The above results are robust to different measures of earnings management, various religion variables, and a variety of sensitivity tests.
Read further at: Xingqiang Du, Wei Jian, Shaojuan Lai, Yingjie Du & Hongmei Pei. 2015. Does Religion Mitigate Earnings Management? Evidence from China.
Journal of Business Ethics, 131(3), 699-749.
Does monetary intelligence matter? And more for males than females?
Research suggests that attitudes guide individuals’ thinking and actions. In this study, the authors explore the concept of monetary intelligence (MI) and investigate the relationships between a formative model of money attitudes involving affective (MI-A), behavioural (MI-B), and cognitive (MI-C) components and several sets of outcome variables—unethical intentions, intrinsic and extrinsic job satisfaction, and coping strategies. Based on 515 managers in the Republic of Macedonia, they tested the model for the whole sample and also cross sector (public vs. private) and gender.
Managers’ negative stewardship behaviour (MI-B) and positive cognitive meaning of money (MI-C) define MI which, in turn, is related to unethical intentions (corruption, theft, and resource abuse). Positive cognition in the public sector and poor stewardship behaviour in the private sector contribute to unethical intentions, respectively. Good stewards (MI-B) have higher intrinsic and lower extrinsic job satisfaction, those in the private sector, in particular. Affective motive (MI-A) and stewardship behaviour are related to their stronger “approach” coping strategies and weaker “avoidance” coping strategies. Affective motive and stewardship behaviour contribute to coping responses for managers in the public and private sectors, respectively. Further, the relationship between stewardship behaviour and coping mechanisms exists for females, but not for males.
The researchers demonstrate that MI (money smart), a type of social intelligence, allows individuals to monitor their own emotions, behaviours, and cognitions and guides their thinking and actions.
For more information, see Elisaveta Gjorgji Sardžoska and Thomas Li-Ping Tang. 2015. Monetary Intelligence: Money Attitudes—Unethical Intentions, Intrinsic and Extrinsic Job Satisfaction, and Coping Strategies Across Public and Private Sectors in Macedonia.
Journal of Business Ethics, 130(1), 93-115.
No gender differences when professional accountants evaluate moral intensity for earnings management
Gender differences in ethical evaluations may vary across types of behaviours. This controlled experiment explores gender differences in ethical evaluations, moral judgment, moral intentions, and moral intensity evaluations by surveying a group of professional accountants to elicit their views on a common earnings management technique.
The researchers find no significant differences between male and female professional accountants when they make an ethical evaluation involving earnings management by shipping product early to meet a quarterly bonus. Both male and female professional accountants made a similar moral judgment that this action should not be completed and indicated similar moral intentions to report this type of behavior. Further, male and female professional accountants made similar moral intensity evaluations when product is shipped early to meet a quarterly bonus.
More details are at: Tara J. Shawver & Lynn H. Clements. 2015. Are There Gender Differences When Professional Accountants Evaluate Moral Intensity for Earnings Management?
Journal of Business Ethics, 131(3), 557-566.