Superiors’ Discretionary Allocations when Agents Face Disparate Performance Risk

Journal of Management Accounting Research 33 (2): 151-166

Posted: 18 Aug 2017 Last revised: 21 Sep 2021

See all articles by Michael Majerczyk

Michael Majerczyk

Georgia State University - School of Accountancy

Tyler F. Thomas

University of Wisconsin - Madison

Date Written: July 6, 2020

Abstract

Our study examines superiors’ allocation decisions for otherwise homogeneous agents facing disparate performance risk (i.e., unequal likelihoods a given amount of effort will translate to an anticipated level of performance). We predict and find that superiors sympathize, through their bonus allocation decisions, with those agents confronted with greater performance risk. However, this behavior changes when superiors are responsible for allocating initial resources between the agents and have task-irrelevant reputational information concerning the agents, such that superiors favor the advantaged agent and give less sympathy to the disadvantaged agent. We provide additional evidence that such favoritism toward the advantaged agent leads to disparity in agents’ fairness and satisfaction perceptions. Our results have implications for organizations, given the pervasiveness of discretion in allocation decisions and concerns for fairness, job satisfaction, and their effects on performance.

Suggested Citation

Majerczyk, Michael and Thomas, Tyler F., Superiors’ Discretionary Allocations when Agents Face Disparate Performance Risk (July 6, 2020). Journal of Management Accounting Research 33 (2): 151-166, Available at SSRN: https://ssrn.com/abstract=3021127 or http://dx.doi.org/10.2139/ssrn.3021127

Michael Majerczyk

Georgia State University - School of Accountancy ( email )

P.O. Box 4050
Atlanta, GA 30302-4050
United States

Tyler F. Thomas (Contact Author)

University of Wisconsin - Madison ( email )

Wisconsin School of Business
975 University Avenue
Madison, WI 53706
United States

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