Jeremy Douthit

Interests

Research

Management Accounting;Cost Accounting;Control Systems;Contract Design;Experimental Economics

Teaching

Management Accounting;Cost Accounting

Courses

Scholarly Contributions

Journals/Publications

• Douthit, J., Kachelmeier, S., & Van Landuyt, B. (2024). Does auditor assurance of client prosocial activities affect subsequent reporter-auditor negotiations?. Accounting, Organizations and Society, 112. doi:10.1016/j.aos.2024.101550
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  In two incentivized experiments, we investigate the potential for auditor assurance of prosocial activities akin to Environmental, Social, and Governance (ESG) initiatives to bias the initial positions and final outcomes of subsequent reporter-auditor negotiations. This possibility arises from the psychological theory of licensing, with a prosocial activity providing the motivation for licensing, while auditor assurance provides a perceived opportunity for licensing. We find that the combination of a preliminary prosocial activity by the reporter with auditor assurance of that activity leads reporters to specify more aggressive initial negotiation positions, although it does not result in more lenient initial positions by the auditor. The final outcomes of reporter-auditor negotiations are biased in the reporter's favor in our first experiment, in which auditor assurance of a prosocial reporter activity is of a social and collaborative nature. This result does not extend to our second experiment in which auditor assurance is not collaborative, although we still observe more aggressive reporters. Overall, our research identifies aggressive reporting as a potential unintended consequence of ESG assurance, especially when that assurance is of a more collaborative variety.
• Douthit, J., Liu, J., Schwartz, S., & Young, R. (2024). An Experimental Study of Endogenous Discretionary Controls on Employee Effort. European Accounting Review, 33(1). doi:10.1080/09638180.2022.2063151
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  Discretionary controls are controls that can be applied at the ex post discretion of the superior rather than being supported by pre-committed enforceable contracts. This study examines employees’ effort levels when a discretionary control is endogenously present (chosen by the superior) relative to when it is exogenously present (assigned by the experimenters). Results from our gift-exchange experiment regarding superiors’ choice of a discretionary control run counter to prior research on superiors’ choice to use pre-committed controls in two important ways. First, we find employee effort is unaffected by the superior’s choice of a discretionary control relative to when it is exogenous. That is, the intentional choice of a discretionary control does not seem to be resented by the employee. Second, we find employee effort is lower when superiors choose not to have a discretionary control present relative to when it is exogenously unavailable. That is, we not only find no reward to forgoing a discretionary control, but rather a cost to not choosing a discretionary control. In sum, our results support the prevalence of discretionary controls in practice.
• Douthit, J., Majerczyk, M., & McLuckie Thain, L. (2024). Updated Theory and New Evidence on the Effect of Information System Precision on Managerial Reporting. Journal of Management Accounting Research, 36(1). doi:10.2308/JMAR-2022-050
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  Information asymmetry is fundamental to participative budgeting. Hannan, Rankin, and Towry (2006, “HRT”) develop a nuanced theory regarding the effect of information asymmetry on slack. The authors provide evidence that suggests increasing the precision of a superior’s information system, thereby reducing information asymmetry, can increase slack. We develop a refined version of HRT’s theory by incorporating evidence of how nonpecuniary incentives affect subordinates’ reporting slack from research subsequent to HRT. Our updated theory predicts that slack decreases as information system precision increases, opposite to the results in HRT. To test our refined theory, we replicate HRT’s experiment and find results consistent with our theory. Our results support HRT’s general theory but highlight the importance of establishing regularities of how nonpecuniary incentives affect behavior in accounting. Specifically, our updated theory and new evidence suggest that improving information system precision decreases budgetary slack, contrary to the results suggested in HRT.
• Douthit, J., Mao, Z., & Martin, P. (2024). Tend to one's own house: The effect of firm CSR on employee effort. Contemporary Accounting Research, 41(4). doi:10.1111/1911-3846.12987
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  We examine whether a firm's corporate social responsibility (CSR) actions that benefit external parties can cause the firm's employees to reduce their effort. We expect employees will reduce their effort in response to their firm's external CSR actions when they perceive that they are treated poorly by the firm and that the firm's external CSR actions use resources that could have been readily transferred toward improving employee treatment. We expect that, when employees hold both of these perceptions, they will react negatively to the firm's CSR actions due to heightened feelings of unfairness. Results support our expectations and theory. We find that employees respond negatively to CSR only when they perceive that they are treated poorly by their firm and that CSR uses transferable resources. Further, we find these effects are driven by employees' perceptions of the fairness of their firm's actions toward employees. Our study suggests that firms should consider how employees perceive their treatment by the firm and the transferability of the resources used for CSR actions that benefit external parties.
• Douthit, J., Martin, P., & McAllister, M. (2021). Corporate Philanthropy and Employee Productivity. Strategic Finance, 13-14.
• Douthit, J., Martin, P., & Mcallister, M. (2022). Charitable Contribution Matching and Effort-Elicitation. The Accounting Review, 97(1), 213-232. doi:10.2308/tar-2018-0186
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  We examine the effect of a charitable contribution matching (CCM) program on employee effort. In CCM programs, employers commit to match employees' donations to charity. We expect CCM to activate a norm of other-regarding behavior, inducing employees to increase effort to benefit their employer. Experimental results robustly support our expectation. We find that CCM increases effort under both fixed-wage and performance-based incentive contracts. Further, our results suggest CCM is more effective at eliciting effort than alternative uses of firm capital. Specifically, CCM is more effective at eliciting effort than the firm allocating an equivalent amount of capital to either direct firm charitable giving or increased performance-based pay. Our study suggests that CCM has efficient and robust effort-elicitation benefits that increase its value as a compensation tool incremental to any initial employee selection benefits from CCM and any effort benefits from firms' direct charitable giving.
• Douthit, J., Schwartz, S., Stevens, D., & Young, R. (2022). The effect of endogenous discretionary control choice on budgetary slack: An experimental examination. Journal of Management Accounting Research, 34(3), 99-118. doi:https://doi.org/10.2308/JMAR-2020-016
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  This study examines the effect of endogenous control choice on budgetary slack. The superior chooses between two alternatives: no control, wherein the superior commits to accept any budget, and a discretionary rejection authority control, wherein the superior decides ex post whether to accept or reject budgets. For both alternatives, we find that slack is lower when the superior chooses an alternative than when it is assigned exogenously. Our theory and results suggest that a superior's choice of whether to introduce controls signals a superior's expectations and intentions. The superior's choice of no control signals trust and an intention to foster a norm of trustworthiness. The superior's choice of rejection authority signals an above-average willingness to use rejections to enforce norms. Our results suggest that the value of participative budgeting may be increased if superiors can communicate to subordinates the expectations and intentions behind the design of the control system.
• Douthit, J., Millar, M., & White, R. (2021). Horseshoes, Hand Grenades, and Regulatory Enforcement: Close Experience with Potential Sanctions and Fraud Deterrence. Organizational Behavior and Human Decision Processes, 166. doi:https://doi.org/10.1016/j.obhdp.2019.09.001
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  We investigate the deterrence effect of experience with regulatory enforcement on fraud in a unique natural setting. Using ride-level data on New York City taxicab drivers, we identify drivers who fraudulently overcharge customers and pair them with the outcomes of drivers’ experience with regulatory enforcement (taxi court). We examine whether drivers’ experience with the taxi court, specifically whether the taxi court found them guilty or not guilty of fraud, affects their subsequent fraud. Interestingly, we find that the effect of experience with the regulatory enforcement on the likelihood of future fraud depends on the verdict received. Consistent with an impact bias in drivers’ affective forecasting, drivers who are found guilty (not guilty) are more (less) likely to commit fraud than similar drivers without recent taxi court experience. Our results have implications for academics and policymakers by showing that sometimes the threat of enforcement can be more effective at deterring future fraud than the actual enforcement itself.
• Blay, A., Douthit, J., & Fulmer, B. (2019). Why don't people lie? Negative affect intensity and preferences for honesty in budgetary reporting. Management Accounting Research, 42. doi:https://doi.org/10.1016/j.mar.2018.05.001
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  Budgets are instrumental in management 
• Douthit, J., & Majerczyk, M. (2019). Subordinate perceptions of the superior and agency costs: Theory and evidence. Accounting, Organizations and Society, 78. doi:https://doi.org/10.1016/j.aos.2019.07.003
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  This study investigates the effect of subordinate perceptions of the legitimacy of the superior in her role on subordinate misreporting. Using social norm theory regarding property rights, we predict that when subordinates perceive a superior as having more role legitimacy, they perceive the superior as being a more rightful claimant of project profits, which reduces misreporting. We test this prediction using a participative budgeting experiment that manipulates perceptions of the superior's role legitimacy. We find that budgetary slack is lower when subordinates perceive superiors to be legitimate in their roles than when subordinates perceive superiors to be illegitimate. Further, comparisons to a baseline treatment intended to induce neutral perceptions of role legitimacy, as in prior research, suggest that superior role legitimacy decreases slack. Supplemental experiments suggest that these results are generally robust to several design choices. The results from our three experiments suggest that role legitimacy decreases slack relative to random (neutral) perceptions; however, we do not find a statistically significant increase in slack from role illegitimacy relative to random perceptions across our three experiments. We discuss methodological implications from focusing on promoting role legitimacy and implications for practice, which has largely focused on problems from, and avoidance of, illegitimacy.
• Douthit, J., & Stevens, D. (2014). The Robustness of Honesty Effects on Budget Proposals when the Superior has Rejection Authority. The Accounting Review, 90(2), 467-493. doi:10.2308/accr-50937
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  ABSTRACT Rankin, Schwartz, and Young (2008) find experimental evidence that manipulating whether the budget request of the subordinate requires a factual assertion has no effect on budgetary slack when the superior can reject the budget. This calls into question the role of honesty in participative budgeting settings. Using Rankin et al.'s (2008) manipulation to capture honesty effects, we examine the robustness of honesty effects on budget proposals when the superior has rejection authority in two experiments. In Experiment 1, we document that honesty has a strong effect on budgetary slack when the salience of distributional fairness is reduced by withholding the relative pay of the superior from the subordinate. In Experiment 2, we document that honesty continues to have a strong effect on budgetary slack when the salience of reciprocity is increased by giving the superior the ability to set the subordinate's salary. Thus, our evidence suggests that honesty effects on budget proposals are generally robust to giving the superior rejection authority. Our study helps explain prior experimental results and clarifies the role of honesty in participative budgeting settings. Data Availability: Experimental data are available from the authors upon request.
• Douthit, J., Kearney, L., & Stevens, D. E. (2012). Can agent cheap talk mitigate agency problems in the presence of a noisy performance measure? An experimental test in a single- and multi-period setting. Journal of Management Accounting Research, 24(1). doi:https://doi.org/10.2308/jmar-50199
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  Given traditional agency theory assumptions and unobservable effort in a single-period setting, a moral hazard arises in which the agent is expected to shirk and provide the minimal possible effort after contracting with the principal. Traditional solutions to this agency problem include paying the agent a financial incentive tied to some noisy measure of performance or allowing the agent to develop a reputation over multiple periods. As the noisiness of the performance measure increases, however, these traditional solutions become increasingly costly and ineffective. In many single- and multi-period agency settings in the firm, however, the agent can communicate a promised level of effort to the principal prior to contracting. We document that this pre-contract communication, which is non-enforceable and therefore considered “cheap talk” by traditional economic theory, can be highly effective in mitigating the moral hazard problem in agency theory. In a repeating single-period experimental setting where production is observable but is a very noisy indicator of effort, communication of a promised level of effort results in higher pay for the agent, higher effort, and higher expected profit for the principal than the control group. When the principal and agent interact over multiple periods, reputation building is ineffective, but cheap talk continues to yield superior outcomes. These results are consistent with recent economic theory incorporating social norms such as the norm of promise-keeping.

Presentations

• Douthit, J. (2025). Does the source of worker's productive efficiency affect their effort provision. Management Accounting Section Midyear Meeting.
• Douthit, J. (2024). Does the source of worker's productive efficiency affect their effort provision. University of Waterloo Accounting Workshop Series. Waterloo, ON, Canada.
• Douthit, J., Hewitt, M., & Sauciu, A. (2023). Reducing Strategic Uncertainty in Teams by Combining Team and Individual Relative Performance Evaluations. Utah State University Accounting Workshop Series. Logan, UT: Utah State University.
• Douthit, J., Garrett, J., & Way, D. (2022). Does Prior Experience Reduce the Ability of Cooperation-Inducing Controls to Develop Trust between Employees?. Chapman University Accounting Workshop Series. Orange, CA: Chapman University.
• Douthit, J., Hewitt, M., & Sauciuc, A. (2022). Reducing Strategic Uncertainty in Teams by Combining Team and Individual Relative Performance Evaluations. Erasmus University Rotterdam Accounting Workshop Series. Rotterdam, Netherlands: Erasmus University.
• Douthit, J., Mao, Z., & Martin, P. (2021, June). Tend to One's Own House: The Effect of Firm CSR on Employee Effort. Global Management Accounting Research Symposium.
• Douthit, J., Mao, Z., & Martin, P. (2021, May). Tend to One's Own House: The Effect of Firm CSR on Employee Effort. European Network for Experimental Accounting Research Online Seminar.
• Douthit, J., Garrett, J., & Way, D. (2020, August). New Controls and the Development of Trust. American Accounting Association Annual Meeting.
• Douthit, J., Hewitt, M., & Sauciuc, A. (2020, February). Multi-level Relative Performance Incentives in Teams. Florida State University Accounting Research Series.
• Douthit, J., Majerczyk, M., & McLuckie Thain, L. (2020, Jan.). Updated Theory and New Evidence on the Effect of Information System Precision on Managerial Reporting. American Accounting Association Managerial Accounting Section Midyear Meeting.
• Douthit, J., Mao, Z., & Martin, P. (2020, December). Tend to One's Own House: The Effect of Firm CSR on Employee Effort. Tilburg University Accounting Research Series.
• Douthit, J., Garrett, J., & Way, D. (2019, November). New Controls and the Development of Trust. Georgia Tech Accounting Workshop Series. Atlanta, GA: Georgia Institute of Technology.
• Douthit, J., Hewitt, M., & Sauciuc, A. K. (2019, January). Multi-level Relative Performance in Teams. Management Accounting Section Midyear Meeting. Ft. Lauderdale, FL: American Accounting Association.
• Douthit, J., Kachelmeier, S., & Van Landuyt, B. (2019, September). Do Prosocial Activities Influence Auditor-Client Negotiations? An Experimental Assessment. University of Illinois Accounting Workshop Series. Champaign, IL: University of Illinois at Urbana-Champaign.
• Douthit, J., Majerczyk, M., & McLuckie Thain, L. A. (2019, June). Updated Theory and New Evidence on the Effect of Information System Precision on Managerial Reporting. Global Management Accounting Research Symposium. East Lansing, MI: Michigan State University.
• Douthit, J., Majerczyk, M., & McLuckie Thain, L. A. (2019, September). Updated Theory and New Evidence on the Effect of Information System Precision on Managerial Reporting. Hoosier Accounting Research Conference. Bloomington, IN: University of Indiana.
• Van Landuyt, B., Kachelmeier, S., & Douthit, J. (2019, October). Do Prosocial Activities Influence Auditor-Client Negotiations? An Experimental Assessment. UA/ASU Accounting Research Conference. Tempe, AZ: Arizona State University.
• Van Landuyt, B., Kachelmeier, S., & Douthit, J. (2019, September). Do Prosocial Activities Influence Auditor-Client Negotiations? An Experimental Assessment. ABO Research Conference. Providence, RI: AAA ABO Section.
• Douthit, J., Hewitt, M., & Sauciuc, A. K. (2018, April). Motivating Team Output: The Effects of Relative Performance Evaluations on Direct Effort, Indirect Actions, and Strategic Uncertainty. Wilfred Laurier University. Waterloo, Ontario, Canada.
• Douthit, J., Hewitt, M., & Sauciuc, A. K. (2018, June). Motivating Team Output: The Effects of Relative Performance Evaluations on Direct Effort, Indirect Actions, and Strategic Uncertainty. Global Management Accounting Research Symposium. Copenhagen, Denmark.
• Douthit, J., & Sauciuc, A. K. (2017, April). Budgetary Pressure and Performance in Unstable Production Environments. Accounting Research Series. Ames, IA: Iowa State University.
• Douthit, J., & Sauciuc, A. K. (2017, Jan). Budgetary Pressure and Performance in Unstable Production Environments. Management Accounting Section Midyear Meeting. San Juan, PR: American Accounting Association.
• Douthit, J., Martin, P., & McAllister, M. (2017, Aug). The Effects of Charitable Contribution Matching on Effort under Formal and Informal Labor Contracts. American Accounting Association Annual Meeting. San Diego, CA: American Accounting Association.
• Douthit, J., Martin, P., & McAllister, M. (2017, Jan). The Effects of Charitable Contribution Matching on Effort under Formal and Informal Labor Contracts. Management Accounting Section Midyear Meeting. San Juan, PR: American Accounting Association.
• Douthit, J., Schwartz, S., Stevens, D., & Young, R. (2017, Mar). The Effect of Endogenous Contract Selection on Budgetary Slack: An Experimental Examination of Trust and Distrust. CEAR Conference on the The Effects of Formal and Informal Controls on Organizational and Market Risk. Atlanta, GA: Center for the Economic Analysis of Risk.
• Douthit, J., Schwartz, S., Stevens, D., & Young, R. (2017, Oct). The Effect of Endogenous Contract Selection on Budgetary Slack: An Experimental Examination of Trust and Distrust. Accounting, Behavior, and Organizations Midyear Meeting. Pittsburgh, PA: American Accounting Association.
• Douthit, J. (2016, June). The Effect of Worker Skill as a Source of Productive Efficiency in an Incomplete Contract Environment. Global Management Accounting Research Symposium. East Lansing, MI.
• Douthit, J., & Majerczyk, M. (2016, Jan). The Effect of Legitimacy of the Superior on Agency Costs: Theory and Evidence. Accounting, Behavior and Organizations Midyear Meeting. Dallas, TX: American Accounting Association.
• Douthit, J., & Sauciuc, A. K. (2016, Dec). Budgetary Pressure and Performance in Unstable Production Environments. 10th Conference on New Directions in Management Accounting. Brussels, Belgium: European Institute for Advanced Studies in Management.
• Douthit, J., & Sauciuc, A. K. (2016, Oct.). Budgetary Pressure and Performance in Unstable Production Environments. Accounting, Behavior and Organizations Midyear Meeting. Albuquerque, NM: American Accounting Association.
• Douthit, J., Martin, P., & McAllister, M. (2016, April). The Effects of Charitable Contribution Matching on Effort under Formal and Informal Labor Contracts. University of Kentucky Accounting Research Seminar. Lexington, KY: University of Kentucky.
• Douthit, J., Martin, P., & McAllister, M. (2016, Oct). The Effects of Charitable Contribution Matching on Effort under Formal and Informal Labor Contracts. Accounting, Behavior and Organizations Midyear Meeting. Albuquerque, NM: American Accounting Association.
• Douthit, J. (2015, October). The Effect of Reciprocity and Wages on Effort in Skill-Based and Non-Skill-Based Settings. Accounting, Organizations and Behavior Midyear Meeting. Nashville, TN: American Accounting Association.
• Douthit, J., & Thornock, T. (2015, January). Level Up: The Effect of Contract Design on Skill Development in a Skill Transfer Task Environment. Management Accounting Section Midyear Meeting. Newport Beach, CA: American Accounting Association.
• Douthit, J., & Thornock, T. (2015, June). Performance Tradeoffs in the Face of Change: The Effect of Changing Tasks and Compensation Contracts on Current and Future Performance. Global Management Accounting Research Symposium. Copenhagen, Denmark: Copenhagen Business School.
• Douthit, J., Schwartz, S., Stevens, D., & Young, R. (2015, June). The Effect of Endogenous Contract Selection on Budgetary Slack: An Experimental Examination of Trust, Distrust and Trustworthiness. Bern University Accounting Research Seminar. Bern, Switzerland: Bern University.
• Douthit, J., & Thornock, T. (2014, October). Level Up: The Effect of Contract Design on Skill Development in a Skill Transfer Task Environment. Accounting, Behavior, and Organizations Midyear Meeting. Philadelphia, PA: American Accounting Association.
• Douthit, J., & Thornock, T. (2014, October). Level Up: The Effect of Contract Design on Skill Development in a Skill Transfer Task Environment. Brigham Young University Accounting Research Symposium. BYU, Provo, UT.
• Douthit, J., Schwartz, S., Stevens, D., & Young, R. (2014, September). The Effect of Endogenous Contract Selection on Budgetary Slack: An Experimental Examination of Trust and Trustworthiness. Florida State University's Experimental Social Sciences Readings Group. Tallahassee, FL: FSU xs/fs.