In this study, we experimentally investigate how managers' budget reporting behavior is influenced by two important features of the budgeting system: the measurement basis used in budget preparation (i.e., whether managers make budget reports in financial or nonfinancial measures) and managers' slack benefits in budget execution (i.e., whether managers benefit from budgetary slack directly or through an intermediate activity). While prior research suggests that moral self-regulation helps promote honest behavior, we predict that a financial measurement basis undermines moral self-regulation by strengthening the manager's desire to advance self-interest and that the absence of direct slack benefits undermines moral self-regulation by making misreporting more justifiable. We also predict that the effects of these two budgetary features on honesty are non-additive, due to the manager's diminishing marginal net utility from misreporting. Experimental results are consistent with our predictions. The implications of our findings for management accounting theory and practice are discussed.

We experimentally investigate how increases in legally required minimum wages affect wage offers, wage premiums (i.e., the excess of wages over the minimum wage), and employee effort. Prior research has documented a gift-exchange relationship between firms and employees, whereby higher wage offers lead to higher effort. However, when the minimum wage increases, expectations regarding gift wages may also change. We predict that, following such a change, firms and employees will self-servingly determine their reference point for gift wages. As a result, while firms will increase wage offers, wage premiums will decline, and thus employees will not increase their effort. The results of (1) a laboratory experiment and (2) two online experiments are consistent with our predictions, suggesting that minimum-wage increases can have a negative effect on employee effort. Ultimately, employees respond to equivalent wages differently depending on the context surrounding the wage level. Implications for theory and practice are discussed.