Defense Date


Document Type


Degree Name

Doctor of Philosophy



First Advisor

Carolyn Norman


This study examines the effects of research and development (R&D) reporting method and managerial knowledge of supervisor compensation on R&D project continuation decisions. The current study employs an experiment with a 2x3 between-participants design, manipulating both R&D reporting method (expense vs. capitalize) and knowledge of supervisor compensation (control group with no knowledge vs. knowledge of non-restricted stock compensation vs. knowledge of restricted stock compensation). Using salient short-term incentives to motivate real earnings management, this study demonstrates that capitalization may result in managers foregoing economically efficient R&D investment opportunities. The results indicate that managerial knowledge of supervisor compensation structure has little influence on managers’ R&D project continuation choices. However, when managers capitalizing R&D expenditures had knowledge that their supervisors received non-restricted (short-term) stock compensation their perceived personal responsibility for the decision significantly decreased. Participants who capitalized R&D expenditures and had knowledge that their supervisor received restricted (long-term) stock compensation rated the importance of making a decision to please their supervisor significantly higher than all other participants. Additionally, participants with knowledge that their supervisors restricted stock compensation were significantly more concerned about the likelihood of negative personal repercussions regardless of R&D reporting method. These findings contribute to the management accounting literature by providing new insights on the influence of knowledge of supervisor compensation on managerial decision making as well as additional insights into the factors that contribute to and limit real earnings management. This study also extends the literature on R&D by providing evidence of the potential for real earnings management when R&D expenditures are capitalized in the absence of personal responsibility.


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Is Part Of

VCU University Archives

Is Part Of

VCU Theses and Dissertations

Date of Submission

May 2013

Included in

Accounting Commons