The Roles of Cynicism, CFO Pressure, and Moral Disengagement on FIN 48 Earnings Management

Archival research reports that managers often use the FIN 48 uncertain tax liability accrual to manage earnings. To assess solutions to this problem, we deconstruct the ethical and psychological reasoning that leads to FIN 48 opportunistic behavior. Hence, we employ a survey of seasoned accounting m...

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Bibliographic Details
Published in:Journal of business ethics 2023-07, Vol.185 (3), p.545-562
Main Authors: West, Ashley Nicole, Fleischman, Gary M.
Format: Article
Language:English
Subjects:
Archival research
Business and Management
Business Ethics
Cynicism
Disengagement
Earnings
Earnings management
Education
Employee behavior
Ethics
Liability
Management
Managers
Original Paper
Philosophy
Quality of Life Research
Transformational leadership
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Summary:Archival research reports that managers often use the FIN 48 uncertain tax liability accrual to manage earnings. To assess solutions to this problem, we deconstruct the ethical and psychological reasoning that leads to FIN 48 opportunistic behavior. Hence, we employ a survey of seasoned accounting managers to assess the influences of cynicism, two measures of moral disengagement, and pressure from a CFO on the propensity to engage in FIN 48 earnings management. Specifically, we manipulate the influence of the study scenario supervisory CFO as either a latent bully or a transformational leader. While the CFO bully main effect condition enhances FIN 48 earnings management, the CFO transformational leader condition interacts with less cynical accounting managers to reduce FIN 48 earnings management. We also find that both dispositional trait and situational state moral disengagement factors independently mediate the relationship between the cynicism model antecedent and FIN 48 earnings management. Collectively, study findings provide implications for both theory and practice.
ISSN:0167-4544
1573-0697
DOI:10.1007/s10551-022-05210-1