Using an experiment, we investigate the joint effects of compensation caps and formal justification requirements on risk-taking. Compensation caps restrict the earnings potential of decision-makers and have been implemented to influence risk-taking behavior, especially after the financial...

Financial accounting shall enable effective monitoring and control but can itself be subject to self-serving behavior by management, i.e., earnings management. Value-based management (VBM) systems are employed to counteract self-serving managerial behavior in general, as they shall mitigate...