Variance Reporting, Belief Revision, And Profitability

Keywords

Attribution bias; Belief revision; Process feedback; Profitability; Variance reporting

Abstract

Attribution bias can be costly to firms because it hinders decision makers' ability to infer the real cause of prior events and take corrective action to improve future performance. This study extends prior research by examining whether and how the presence of variance reporting from accounting systems affects firm profitability through a labor cost management decision that is highly susceptible to attribution bias. Our results support the prediction that the presence of variance reporting (process feedback) increases the likelihood of belief revision and corrective action related to the systematic error, and thus increases overall profitability for the firm. The findings of our study propose a solution to attribution and learning problems observed when decision makers are responsible for both cost management and bids as documented in prior literature.

Publication Date

1-1-2015

Publication Title

Advances in Accounting Behavioral Research

Volume

18

Number of Pages

155-178

Document Type

Article

Personal Identifier

scopus

DOI Link

https://doi.org/10.1108/S1475-148820150000018005

Socpus ID

84943224702 (Scopus)

Source API URL

https://api.elsevier.com/content/abstract/scopus_id/84943224702

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