The influence of peer honesty and anonymity on managerial reporting

In certain situations, managers are able to observe their peers’ honesty in the budget setting process. This disclosed peer honesty may subsequently influence the individual managers’ honesty. Therefore, this study examines how different types of peer honesty disclosure (no, anonymous, and non-anonymous) influence managerial reporting in a budgeting setting. Non-anonymous disclosure refers to situations where both the honesty of a budget report and the reporter’s identity is disclosed. In the case of anonymous disclosure, only the budget report’s honesty can be observed. Based on different behavioral theories, I predict that honesty decreases over time when peer honesty is disclosed both anonymously and non-anonymously. Moreover, I investigate the research question whether non-anonymous disclosure affects honesty differently than anonymous disclosure does. The results of an experimental investigation show that the disclosure of peer honesty, as predicted, decreases honesty over time for both anonymous and non-anonymous disclosure. With regard to the research question, I find no difference between anonymous and non-anonymous disclosure. The results underline the necessity for management accountants to determine the ability of employees to infer the honesty of their peers. In addition, the implementation of budget-based incentive systems should be reconsidered when peer honesty is disclosed.