Jared D. Harris

Incentives to Cheat: The Influence of Executive Compensation and Firm Performance on Financial Misrepresentation

Despite the many undesirable outcomes of corporate misconduct, scholars have an inadequate understanding of corporate misconducts causes and mechanisms. We extend the behavioral theory of the firm, which traditionally assumes away the possibility of firm impropriety, to develop hypotheses predicting that top management incentive compensation and poor organizational performance relative to aspirations increase the likelihood of financial misrepresentation. Using a sample of financial restatements prompted by accounting irregularities and identified by the U.S. Government Accountability Office, we find empirical support for both incentive and relative performance influences on financial statement misrepresentation.

7T rust, transaction cost economics, and mechanisms

Introduction Organizational scholars increasingly recognize trust as an important factor in intraand inter-organizational relations, significantly influencing everything from the behavior of teams to the performance of strategic alliances and supply chains. Ten years have passed since the publication of two early articles on organizational trust: Bromiley and Cummings (1995) and Cummings and Bromiley (1996). In reflecting on the scholarly impact of these papers – and what such an impact might mean for future work in organizational trust – we discuss the concept of trust, briefly revisit the papers, consider the different ways in which the research has been used, and offer thoughts on the relevance of trust to organizational research. Bromiley and Cummings suggest that the inclusion of trust would expand and extend the research framework of transaction cost economics (TCE). Yet this call for TCE research to include the concept of trust has been largely ignored. Why? We summarize and analyze the apparent justifications for omitting or ignoring trust, leading to a critical examination of several theoretical aspects of TCE. We distinguish between TCE’s calculativeness, based on assuming others are self-interest-seeking with guile, and trust, which we define as beliefs or actions not determined by such calculativeness.

Public trust in business

Preface: discovering new territory in public trust in business Acknowledgements 1. Public trust in business: whats the problem and why does it matter? Andrew C. Wicks, Brian T. Moriarty and Jared D. Harris Part I. Trusting the Institution of Business: 2. The economic crisis of 2008, trust in government, and generalized trust Eric M. Uslaner 3. Too big to trust? Managing stakeholder trust in the post-bailout economy Deepak Malhotra 4. At the crossroads of trust and distrust: skepticism and ambivalence towards business Robert Bies 5. Public trust in business and its determinants Kirsten Martin, Michael Pirson and Bidhan L. Parmar 6. The role of public, relational and organizational trust in economic affairs Karen S. Cook and Oliver Schilke Part II. Public Trust and Business Organizations: 7. Public trust and trust in particular firm-stakeholder interactions: a theoretical model and implications for management Jared D. Harris and Andrew C. Wicks 8. Creating more trusting and trustworthy organizations: exploring the foundations and benefits of presumptive trust Roderick Kramer 9. Building trust through reputation management Paul Argenti 10. Can trust flourish where institutionalized distrust reigns? Reinhard Bachmann and Edeltraud Hanappi-Egger 11. Roles of third parties in trust repair: lessons from high tech alliances for public trust Rosalinde Klein Woolthuis, Bart Nooteboom and Gjalt de Jong 12. The repair of public trust following controllable or uncontrollable organizational failures: a conceptual framework Laura Poppo and Donald J. Schepker 13. Conclusion: towards a better understanding of public trust in business Jared D. Harris, Andrew C. Wicks and Brian T. Moriarty Index.

Financial Misrepresentation: Antecedents and Performance Effects

This doctoral thesis examines the influence of relative performance and managerial incentives on corporate financial misrepresentation, and then tests the relationship between misrepresentation and subsequent operating performance, including the moderating effects of change in board composition and Chief Executive Officer (CEO) turnover. Using a hand-collected data set from several archival sources of company records, the study includes a combination of estimation techniques, including categorical dependent variable and fixed-effect methods, all conducted using a matched sample of misrepresenting and nonmisrepresenting firms. The author draws several important conclusions from the empirical analyses. First, CEO incentive pay and poor relative performance increase the likelihood of misrepresentation. Second, misrepresentation impairs subsequent operating performance, although this negative effect can be partially offset by CEO replacement and increased board independence. The study advances our academic understanding of corporate misconduct and contributes to academic theory across research literatures, including strategic management, organization theory, and business ethics.