Title: The effect of a superior's preference and process control on a subordinate's information processing strategy

Authors: Feng (Johnny) Deng

Addresses: College of Business Administration, California State University at Sacramento, 6000 J St., Sacramento, CA 95819, USA

Abstract: The purpose of this study is to experimentally investigate whether management controls can mitigate a subordinate|s biased cognitive strategy arising from a superior-subordinate goal-information asymmetry in a capital budgeting process. Goal-information asymmetry occurs when a subordinate has less knowledge of a superior|s goal preference than the superior does. A subordinate|s selection of an information-processing strategy in proposing an investment proposal is expected to be affected by the level of goal-information asymmetry (present/absent) which, in turn, can have detrimental effects on the effectiveness and/or efficiency of his or her judgement and decision-making. Finding management controls to mitigate these effects will improve the qualities of managers| information processing and decision making. One kind of management controls – process justification – is the focus of this study. The results showed that the process justification control influenced the subjects| selection of information processing strategies in reacting to the absence or presence of goal-information asymmetry.

Keywords: superiors preferences; process control; process justification; management control; information processing strategy; judgement; decision making; capital budgeting; subordinates cognitive strategy.

DOI: 10.1504/IJBAF.2010.031317

International Journal of Behavioural Accounting and Finance, 2010 Vol.1 No.3, pp.224 - 238

Published online: 31 Jan 2010 *

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