Behavioral aspects of morality and corporate social responsibility in accounting

Hörner, Christoph (2018). Behavioral aspects of morality and corporate social responsibility in accounting. (Dissertation, Universität Bern, Wirtschafts- und Sozialwissenschaftliche Fakultät)

18hoerner_c.pdf - Published Version
Available under License Creative Commons: Attribution-Noncommercial-No Derivative Works (CC-BY-NC-ND).

Download (4MB) | Preview

This thesis consists of four experimental studies on “Behavioral Aspects of Morality and Corporate Social Responsibility (CSR) in Accounting”. CSR activities have a moral connotation that does not necessarily have to be in conflict with a firm’s value creation process as is indicated by the popular phrase “doing well by doing good”. Prior research has identified various reasons why and how CSR can create value for a firm and its shareholders. While this perspective describes a win-win-relation between moral and financial benefits, critics have raised concerns that agents (e.g. managers) might (mis)use firm resources for their personal benefits: they might spend money on CSR because they have personal preferences for its moral or societal benefits and not because of financial benefits for their firms. If this were the case, agents could be reproached for violating their responsibilities towards their principals. In this regard, the Nobel Prize laureate Milton Friedman wrote in his article “The Social Responsibility of Business is to Increase its Profits” in The New York Times Magazine (1970): “In a free-enterprise, private-property system, a corporate executive is an employee of the owners of the business. He has direct responsibility to his employers. That responsibility is to conduct the business in accord-ance with their desires, which generally will be to make as much money as possible while con-forming to their basic rules of the society, both those embodied in law and those embodied in ethical custom.” In my first essay, I examine agents’ moral preferences regarding Corporate Giving, which can be seen as a part of CSR. I create a setting where “doing good” is solely costly for a firm. Hence, if agents spent firm resources on a moral cause, it would constitute a form of agency costs with negative financial consequences for (potential) investors. In a 2 (Morality: morally neutral vs. immoral decision) x 2 (Source of Responsibility: agent vs. principal decision) between-subjects experiment, I analyze whether agents increase moral spending using firm resources to compensate for a prior immoral decision and whether this “moral cleansing” is affected by who is responsible for the prior immoral decision. I predict that agents increase moral spending using their principals’ resources when principals are responsible for the immoral decision, but that they do this to a lesser degree when they themselves are responsible. The underlying intuition is that agents in the former case have few concerns to use firm resources, but find it harder in the latter case to justify the use of firm resources if they themselves are responsible: further, agents’ moral identity may be less compromised when they can justify their behavior as just “doing their job”. I find that spending of firm resources on a moral cause is indeed higher when principals are responsible for an immoral decision compared to a morally neutral decision, but is not higher when agents are responsible. Thus, I identify a new form of moral agency costs arising in hierarchies from interdependencies of decisions with moral connotations because of other-regarding preferences by agents. Supplementary analyses provide further insights: regardless of the source of responsibility, financially profiting from an immoral action increases agents’ guilt and fairness concerns; however, only when principals are responsible for an immoral action, this increases moral cleansing activities. Further, I find no evidence suggesting that agents use private resources to compensate for their own immoral actions. This is consistent with agents disengaging morally when they are “doing their job” and implies that agents seem to use primarily firm resources to for moral cleansing. Not only agents may be driven by moral preferences. In addition, investors may be willing to support firms with a strong CSR performance for reasons beyond the maximization of expected financial benefits. For example, they could decide to forego financial profits if a firm spends resources on activities with societal benefits. Accordingly, a study by Elliott, Jackson, Peecher, and White (2014) suggests that (non-professional) investors might be subconsciously affected by a firm’s CSR performance because of an unintended affective reaction. This affect could be caused by the morality of CSR activities. The authors claim that they reduce what they assume to be an affective reaction by having participants explicitly assess CSR Performance before they estimate a firm’s fundamental value. Specifically, the authors find that assessing a firm’s positive CSR performance before estimating the firm’s value results in lower estimates than the estimates without a prior assessment. They explain their results by the correction of a misattributed affect, which would lead to better estimates. However, in my second essay, I question this explanation and design and conduct an experiment to test an alternative explanation for the study’s results. According to an alternative explanation rooted in speech act theory, respondents might have understood the explicit assessment –that is supposed to reduce any unintended influence– differently than intended by the researchers and might have subtracted important information from their overall assessment of the firm’s fundamental value. Following the two competing explanations, I predict two specific patterns resulting from the comparison of three conditions. However, I cannot find empirical support to claim differences between conditions for the estimates of the fundamental value. This implies that I cannot replicate the effect of Elliott et al. (2014). Given the potentially far-reaching implications of their study, knowing about the limited robustness and generalizability of their results is important. The finding that unintended affective reactions might not play a major role in understanding investors’ decisions regarding firms’ CSR investments increases the importance of research on motivations of investors (not) to invest in firms with a strong CSR performance. The third essay (coauthored with Markus Arnold, Patrick Martin, and Don Moser) contributes to research on this matter. We conduct an experiment to examine German and US investment professionals’ use of corporate social responsibility (CSR) disclosures when making personal investment decisions and investment recommendations to clients. We predict and find that both groups assess higher financial performance and invest more when positive CSR information is disclosed than when no CSR information is disclosed. However, these differences are only significant for German investment professionals. When CSR information is disclosed, both groups’ assessments of CSR performance significantly affect their investment decisions. However, US investment professionals appear to require a higher level of assessed CSR performance than Germans before they increase their investments in response to disclosed CSR information as compared to when no CSR information is disclosed. Importantly, we also predict and find that both groups’ investment behavior is not only affected by the expected financial effects of CSR activities on the firm, but also by the value they place on the societal benefits of the CSR activities. Finally, we find that when making investment recommendations to clients both groups use CSR information in essentially the same manner as they do when making personal investment decisions. Fourth, a research note (coauthored with Ralf Frank) analyzes how including a graphic linking potential non-financial (e.g. CSR) performance drivers to financial performance measures in voluntary disclosures can cognitively affect investors under time pressure. The disclosure of information not based on accounting standards provides firms with leeway for strategic choices as to how and what to report. Graphics might affect investors because they tend to be salient and easily accessible –particularly when cognitive resources are scarce, e.g. under time pressures. We predict that graphics can direct investors’ attention to particularly positive performance indicators, which can then lead to higher assessments of a firm’s investment attractiveness. To test our predictions we manipulate whether investment professionals are provided with a graphic (or not) before they assess a firm as investment opportunity. Further, we examine their information acquisition using eye-trackers. Consistent with our theory, a graphic can direct investors’ attention to particularly positive performance indicators and leads to higher assessments of a firm’s investment attractiveness. These results are important because they suggest that investors can be guided, if not manipulated by graphics when their cognitive resources are scarce.

Item Type:

Thesis (Dissertation)


03 Faculty of Business, Economics and Social Sciences > Department of Business Management > Institute for Accounting and Controlling


300 Social sciences, sociology & anthropology > 330 Economics




Igor Peter Hammer

Date Deposited:

19 Feb 2019 17:40

Last Modified:

22 Oct 2019 17:37



Additional Information:

e-Dissertation (edbe)




Actions (login required)

Edit item Edit item
Provide Feedback