This study examines how the source and nature of reporting standards jointly influence compliance with those standards. More specifically, I examine how decision makers' identification with the source of the standards moderates compliance with different types of standards. Type refers to whether the accounting standard is descriptive or injunctive (i.e., prescriptive). Source refers to the entity promulgating the accounting standards. I conduct three experiments in which participants face a direct trade-off between reporting aggressively to maximize their personal wealth and reporting conservatively to adhere to a standard. I find that identification with the source causes less aggressive reporting for an injunctive standard, but when a standard is descriptive, identification has no effect or an opposite effect. When identification with the source is low, descriptive standards tend to work well compared to injunctive standards. With injunctive standards, persuasive factors, such as identification, likely influence financial managers' aggressive reporting behavior.

Research suggests that employees work harder under penalty contracts than under economically equivalent bonus contracts. We build on this literature by examining how the motivational advantage of penalty contracts depends on a common aspect of real-world contracts: payoff ambiguity. With payoff ambiguity, employees provide effort without knowing how much pay they will receive for a given level of performance. According to our theory, this ambiguity opens the door for employee optimism, which has contrasting effects under each contract frame. Results from an experiment support this theory, with an increase in ambiguity leading to less employee effort with penalty contracts (as employees optimistically expect small penalties) and more effort with bonus contracts (as employees optimistically expect large bonuses). We also find that these effects are stronger for more dispositionally optimistic employees. Overall, our results suggest that bonus contracts may be more motivating and penalty contracts less motivating than previously thought.