Defense Date

Spring 3-25-2022

Degree Type


Degree Name



Business Administration

Committee Chair/First Advisor

Dr. Dana R. Hermanson

Committee Member or Co-Chair

Dr. Velina Popova


Dr. Jennifer Schafer


This study examines two sources of external pressure, Chief Financial Officer (CFO) power and controller incentive compensation, on a controller’s decision to opportunistically report non-GAAP earnings in response to a directive from the CFO to manipulate the measure. In addition, the impact of three internal factors is analyzed in relation to the controller’s decision: responsibility, fairness to shareholders, and experience. Eighty-five (85) experienced public company financial executives participated in a 2x2 between-subjects experiment with CFO power (more powerful versus less powerful CFO) and controller incentive compensation (based on non-GAAP EPS or based on operational measures) randomly manipulated between subjects. Due to strong social desirability bias, I focus on participants’ assessments of what other controllers would do in this situation.

Although CFO power, controller incentive compensation, and controller years of accounting experience were not significant determinants of participants’ responses, results show that the fairness of the decision process to shareholders is significantly related to participants’ assessments of other controllers’ decisions to exclude a transitory loss from reported non-GAAP earnings as directed by their CFO supervisor. Interestingly, I find that two exploratory variables are significant when added to the model. Specifically, when participants perceive greater CEO influence behind the CFO’s directive, they are less likely to indicate that other controllers will comply with the directive. Results also show that controllers who have seen a similar scenario before are more likely to believe that other controllers will make the adjustment.

Results from this study contribute to the growing body of research on the influence of individual behavioral characteristics in financial reporting decisions. In particular, this study highlights the important roles of fairness perceptions, underlying sources of pressure (i.e., the CEO or the CFO), and prior experience with similar situations in the outcomes arising from obedience pressure.

Available for download on Saturday, March 27, 2027