The Attenuating Effect of Intelligent Agents and Agent Autonomy on Managers’ Ability to Diffuse Responsibility for and Engage in Earnings Management

Kipp, Peter
Curtis, Mary
Li, Ziyin
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Advances in IT suggest that computerized intelligent agents (IAs) may soon occupy many roles that presently employ human agents. A significant concern is the ethical conduct of those who use IAs, including their possible utilization by managers to engage in earnings management. Following economics and moral disengagement theory, we investigate how financial reporting decisions are affected when they are supported by the work of an IA versus a human agent, with varying autonomy. In a 2 x 2 between-participants experiment with experienced managers, we manipulate agent type and autonomy, finding that managers engage in less aggressive financial reporting decisions with IAs than with human agents, and engage in less aggressive reporting decisions with less autonomous agents than with more autonomous agents. Path analysis suggests that managers’ perception of control over their agent and ability to diffuse responsibility for their financial reporting decisions serially mediate the effect of agent type and autonomy on managers’ financial reporting decisions. Our results have implications for regulators and practitioners, where the adoption of computerized intelligent agents can attenuate managers’ earnings management activity by preventing them from diffusing responsibility for their actions to others.
Intelligent agents, Moral Disengagement, Earnings Management, Human-computer interaction
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