The contemporary transparency narrative has recently evolved from a predominantly bright side of positive motivational influence to a more nuanced narrative integrating a potential dark side of transparency of demotivating threats to individual information privacy. Based on this more nuanced narrative, we try to provide a first empirical picture relying on an integrated model of direct and indirect psychological consequences of individual performance transparency. We propose a ‘bright’ path between transparency and psychological empowerment and a parallel ‘dark’ path through information privacy concerns. Using panel survey data of 401 employees of the finance function and structural equation modeling, we find that transparency has both a direct and indirect link to psychological empowerment. Taking a closer look at the dark path, we find that the link between transparency and information privacy concerns is moderated by core self-evaluation and relative performance information advantage. In contrast, we do not find a moderating effect of individual performance. With this study, we contribute a novel conceptual integration and first empirical examination of this duality of psychological consequences of transparency of individual performance. Additionally, we enrich the debate about potential moderating factors. Overall, we offer a more nuanced perspective on the value of transparency of individual performance in organizations.

This paper takes a fresh look at auditor independence for small and midsized audit prac-tices (SMPs) by analyzing a German sample of 1,052 firm-year observations between 2007 and 2014 about changes in earnings management (EM) behavior when client importance increases. In particular, we ask whether firms audited by SMPs use higher or lower accrual-based earnings management (AEM) around certain critical client importance thresholds and whether this in-volves a trade-off in real activities earnings management (REM). We compare two measures of client importance, (1) total sales from the client in relation to total sales of the audit firm from all (public interest entity (PIE) and non-PIE) clients and (2) non-audit sales in relation to total sales from the client. For measure (1), we find that clients below the threshold engage in less AEM and more REM as importance increases until reaching a threshold level of importance, at which point the relationship reverses. We do not find significant results for measure (2). Our results hold for de-facto office and partner level analysis, and we provide further reasoning for our re-sults, thereby offering a new perspective on small and midsized auditors’ eligibility to perform PIE audits.

Accounting research has extensively debated the modelling of Earnings Management (EM) for all industries but the baking industry. We provide a first analysis of the validity, strengths and weaknesses of existing loan loss provisioning (LLP) models and develop an extensive framework for modelling components. We rely on US data from 2000-2018 and apply prevalent test procedures that examine the extent of measurement errors, extreme performance, omitted-variable biases and predictive power of each of the models. The results indicate that established modelling can be optimized with regard to measurement errors, omitted-variable biases and predictive power. In particular, we find that including net charge offs is less important while a non-performing loan component is indispensable. In addition, our results reveal that LLP models are less prone to measurement errors related to one-step vs. two-step modelling, while more advanced estimation approaches are not linked to better prediction power.

This study explores whether introducing transparency about relative performance information (RPI) can effectively increase performance of an important task that is not tied to financial incentives of the organization or employee. Therefore, we analyze proprietary data from a medical center, where a reporting tool with aggregated RPI about discharge letter process times is introduced. The process of creating discharge letters represents an important reporting task in a complex working environment. Controlling for patient- and treatment-related factors as well as ward and time specific fixed effects, we find that establishing RPI significantly improves performance by decreasing the average total process times by 59.7 %. This overall reduction in process times can be divided into the initial treatment effect (-23.9 %) and marginally decreasing reductions over time. We understand these performance improvements as a type of learning process caused by social comparison, which starts after the treatment and stabilizes at a high level. Our paper contributes by demonstrating the effectiveness of RPI in a complex work environment, while showing that performance increases are not only significant but also enduring.

The voluntary disclosure literature in accounting has long debated whether managers have a tendency to withhold bad news. However, these studies have been conducted in settings in which, ex-ante, the trade-off be-tween potential benefits and potential costs of withholding information is obscure. In this paper, we study volun-tary disclosure choices using a context rich setting of distressed firms in which potential benefits from withhold-ing news (particularly bad news) are seemingly high whereas the potential costs are seemingly low. Specifically, we focus on the question how ‘going concern’ uncertainty affects voluntary disclosure choices. Our results sug-gest that as financial distress intensifies, there is a lower likelihood and frequency of management earnings fore-casts, indicating that managers may be withholding news, particularly bad news, in distressed firm-years. For comparative purposes, we also present results for safe firm-years and find that managers have a tendency to dis-close bad news as the financial health of the firm worsens.

This paper examines whether firms that act socially responsible engage in different amounts of Earnings Management (EM). In particular, this study tries to disentangle the two main incentives incorporated into Corporate Social Responsibility (CSR) investments and analyses whether these entail diverse EM strategies in terms of accrual-based earnings management (AEM), real activities earnings management (REM), total EM and the trade-off relationship between AEM and REM. Furthermore, we consider the effect of corporate governance (CG) on EM strategies, particularly whether the respective CSR incentives moder-ate this relationship. For our European sample with 2,733 firm-years from the 2005-2014 period, the results show that EM strategies vary between intrinsic and reputational CSR incentives. For both incentives, we find that respective firms engage in lower AEM. However, high-reputation firms use more total EM and trade off from AEM to REM at the expense of shareholder value, whereas intrinsic firms use less total EM and trade off vice versa. Additionally, we find that certain independence in the board limits opportunities to pursue AEM, whereas CSR incentives significantly moderate the outcome of effective monitoring. While both CSR incentives entail a lower use of AEM with increasing independence, high-reputation firms again switch to higher REM and further trade off from AEM to REM. Altogether, the results indicate that firms with a high CSR orientation engage in different EM strategies, depending on their CSR incentives and thereby preserve or jeopardize shareholder value.