An International Meeting of the American Accounting Association American Accounting Association 2006 Annual Meeting August 6–9, 2006 Washington, D.C.

Andrew J. Rosman
University of Connecticut

Stanley F. Biggs
University of Connecticut

Robert Hoskin
University of Connecticut

Abstract: Controlled experiments show that context (firm performance relative to bonus range and monitoring) and personal factors (experience and risk propensity) impact managerial discretion. Monitoring restricted bonus maximization for experienced managers in the lower end of the bonus range, but did not affect those with less experience. Risk propensity impacted management discretion only for experienced managers. Among the more experienced managers, risk seekers were more likely to maximize the bonus regardless of context. For less experienced individuals, risk propensity mattered only in conjunction with monitoring and only in the upper level of the bonus range. Those with less experience who were risk averse maximized their bonus more when they were being monitored than without monitoring. Interpreted in light of the overall pattern of results, this finding suggests that less experienced individuals are conservative with accrual decisions rather than seeking to maximize their bonus.

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