Information Acquisition and Opportunistic Behavior in Managerial Reporting

This study investigates whether discretion in information acquisition affects managerial reporting, enabling opportunistic self-interested behavior, which may erode firm value.1 Information acquisition, including gathering, screening, and editing information, is an important aspect of the functioning of accounting systems (Ewusi-Mensah 1981; Hertog and Wielinga 1992; Woodward 1997). Organizations often delegate responsibility for information acquisition to local managers because, in today's industrialized environments, the effective acquisition of information requires the specialized knowledge and expertise of the local manager (Balakrishnan 1991; Choudhury and Sampler 1997). Such delegation also allows the manager to participate in the development and implementation of information systems, which may increase the manager's satisfaction and perceptions of procedural justice (Hunton and Gibson 1999; McGowan and Klammer 1997). While there are benefits to discretion, we investigate a potential cost. Specifically, we investigate whether allowing managerial discretion results in more opportunistic reporting by managers.