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The Role of Social Influences in Using Accounting Performance Information to Evaluate Subordinates: A Causal Attribution Approach
Yin Xu Old Dominion University Brad M. Tuttle University of South Carolina
ABSTRACT: One important role of accounting information is to provide objective information to assist decision makers in evaluating the performance of their subordinates. Yet whether decision makers use accounting data in an objective fashion, independent of interpersonal factors, is an open question. The purpose of this study is to investigate whether similarities in work style (innovator versus adaptor) between a manager and a subordinate influence the managers causal attributions and subsequent performance evaluation for the subordinate, given accounting performance indicators. The study is conducted in an experimental setting and the research analysis used is developed within the framework of a structural equation model. The results of the study provide initial evidence that interpersonal factors such as work style similarity and personal liking moderate how supervisors use accounting information when they make performance evaluation decisions. The more similar work style between supervisor and subordinate, the more the supervisor likes the subordinate. This, in turn, directly influences what the supervisor believes is the cause of the subordinates performance.

INTRODUCTION he purpose of this study is to investigate whether similarities in work style of managers and subordinates influence the way that managers use accounting data in performance evaluation. The particular aspect of work style investigated here is based on Adaptor-Innovator theory as recently applied to an accounting context by Summers et al. (2000). Relying on research in the similarity-attraction paradigm, we examine the proposition that managers will tend to like similar subordinates, i.e., innovators like other innovators and adaptors like other adaptors. We further integrate attribution theory and predict that managers will attribute good performance to internal factors, such as ability and effort, and poor performance to external factors, such as luck and task difficulty, when evaluating a similar (i.e., liked) subordinate. Just the opposite should occur in dissimilar dyads. We then examine whether these causal attributions influence the managers subsequent performance evaluation for a given set of accounting performance indicators.

The authors express their appreciation to Thomas Cafferty, Adrian Harrell, Richard Schrader, Mark Taylor, workshop participants at the University of South Carolina and State University of New York at Binghamton, Steve Kaplan, the editor, and an anonymous reviewer for their helpful comments and suggestions. The authors also acknowledge the summer research fellowship of Old Dominion University.

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Most of the accounting literature on performance evaluation builds from an economic perspective (e.g., agency theory). The literature has analyzed situations in which managers (i.e., agents) actions can be controlled by using outcome-based contracts (Eisenhardt 1989). Under these conditions, accounting data provides outcome-based information about the agents performance. Previous work has shown that the choice of performance measures or types of outcome-based contracts have a significant impact on performance evaluations (e.g., Ittner et al. 2003; Ittner and Larcker 1998; Bacidore et al. 1997; Banker et al. 1993). In addition, research explores situations in which performance information is not contractible. One reason for noncontractible performance information is that certain aspects of performance are either difficult or too expensive to monitor. As a result, management may be in favor of subjective performance evaluation (Prendergast and Topel 1993, 357) and the manner in which the use of subjectivity or noncontractible information via bonus schemes may distort the payoffs to subordinates (Baiman and Rajan 1995). The studies show that subjective performance evaluation allows a principal to consider information that is relevant to performance, but that is not contractible. Lipe and Salterio (2000, 284) further examine subjective or judgmental effects of performance measures on evaluations and find a cognitive difficulty on the part of superior managers in using a different set of performance measures (i.e., the balanced scorecard). Their study suggests that managers subjectivity plays an important role in performance evaluation. The present study builds on this literature by examining how human factors that are not relevant to performance evaluation combine with accounting measures during the subjective performance evaluation process. We argue that supervisors often evaluate their subordinates in a subjective manner despite the availability of objective accounting information. More specifically, given the exact same performance measure for two subordinates, managers may behave differently when they evaluate them. Such behavior is often subtle and difficult to be specified in any outcome-based contracts. One practical problem in performance evaluation is the difficulty of using accounting performance measures without compromising its objectivity. For example, it is not uncommon for one worker, whose objective performance data are inferior to anothers, to receive higher evaluations and more compensation simply because a superior likes him or her (Cardy 1998). Often in these cases, accounting data are cited as the basis for the evaluation. Such situations open the possibility that objective accounting performance data are sometimes colored by interpersonal factors that are irrelevant to performance. Furthermore, managers may be unaware that their evaluations are not objective and consistent. Attribution theory provides a framework for understanding how irrelevant interpersonal factors can influence the relationship between objective accounting data and performance evaluation. Attribution theory is one of the most widely referenced theories in organizational behavior, including performance evaluation research (cf., Benkhoff 1998). It focuses on the individuals causal attributions for anothers behavior and the subsequent consequences of those attributions. Applying attribution theory to the task of performance evaluation suggests that managers will first make causal attributions to explain accounting performance data before taking action (e.g., Shields et al. 1981; Birnberg et al. 1977). The theory further suggests that the link between accounting performance data and causal attributions and the link between causal attributions and manager actions may be moderated by interpersonal factors, even if unconsciously. Findings from similarity-attraction research provide a potential moderator. This research indicates that individuals view more favorably and like those who are seen as having similar attitudes, opinions, and backgrounds than those who are seen as dissimilar (e.g., Byrne 1961, 1971; Byrne and Nelson 1965). In work-related settings, research in performance evaluation suggests that actual or perceived similarities in demographic and personality characteristics between the rater and the ratee are associated with more favorable performance ratings in manager-subordinate dyads (e.g., Deluga
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1998; Judge and Ferris 1993; Pulakos and Wexley 1983; Wayne and Liden 1995). While this research has established the influence of similarity on performance evaluation, the possible role of similarity and liking as intervening variables in the attribution process has not been examined. Combining attribution theory with the similarity-attraction paradigm suggests that managers will make different attributions for a subordinates performance depending on how well the manager likes the subordinate, which, in turn, is affected by how similar the subordinate is to the manager. Whereas most of the previous similarity-attraction studies have focused on the effect of demographic or attitudinal similarity, the present study focuses on an important aspect of work style: adaptive versus innovative problem solving. To date, the only research on work-related aspects of similarity has shown that similarity in terms of conscientiousness affects performance evaluations (Deluga 1998). To the extent that conscientiousness leads to better performance, it is a valid and relevant variable to performance evaluations. Hence, similarity and relevance are confounded in these studies. Work style, however, is not a performance-relevant variable in that both adaptors and innovators are needed in the workplace. Therefore, adaptor-innovator work style provides a stronger test of similarity theory in a performance evaluation task and in a work setting. Work style, based on the Kirtons (1984) Adaption-Innovation Theory, relates to an individuals style of problem solving and decision making. Research suggests that work style (adaptor or innovator) differs from other variables previously examined in the subjective performance evaluation literature in that it refers to the preferred manner of tackling problems but not to the ability to successfully solve problems (see Kirton 1984). Unlike these previous other variables (e.g., conscientiousness), work style also is a socially neutral trait in our society in the sense that neither approach is more highly valued than the other. Therefore, there is no normative reason to use similarity in work style to evaluate ones subordinates, while at the same time there may be psychological biases that lead to it. This study is important for a number of reasons. First, it helps develop an understanding of a particular problem that often occurs during performance evaluation, namely, the interactions of social influences with accounting information. Second, research on performance evaluation will benefit from merging two previously separate streams: attribution theory and similarity-attraction paradigm. Doing so illuminates the process by which similarity and attraction affect performance evaluation. Third, the study extends similarity-attraction research by including work style as an important basis for similarity comparisons. This important extension opens new possibilities for future workplace research in this area. The study also extends attribution research by incorporating accounting performance information and by testing similarity and liking as potential moderators in the way accounting information is used. Fourth, the study employs a new adaptor-innovator measure based on the Summers et al. (2000) study that is parsimonious, exhibits strong validity characteristics, and is directly applicable to work settings. The findings suggest that interpersonal factors (i.e., similarity and liking) moderate the manner in which objective accounting data affect performance evaluation. The consequence of such biased use of otherwise objective accounting information has obvious costs for organizations. Employees performing poorly may be rewarded and maintained. Conversely, employees performing well may not be adequately recognized and rewarded, thus leading to feelings of being unfairly treated. Both conditions have negative implications for organizations as they typically reduce motivation, thus adversely affecting morale, productivity, overall output, and turnover. It is important, therefore, for organizations to understand what attributions are made to account for objective accounting performance data and how these attributions ultimately influence evaluation decisions.

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BACKGROUND AND HYPOTHESES Attribution Theory Accounting information plays a fundamental role in evaluating performance. For upper-level managers, such financial accounting information may consist of outcome-based performance measures such as sales or production output, profit, earnings per share, stock price, etc. For middle-level managers, outcome-based measures often include both financial and nonfinancial accounting measures (e.g., on-time delivery, scrap minimization, etc.). Research in attribution theory indicates that performance evaluations based on objective information will be mediated by causal attributions, as managers seek causal explanations for the performance (e.g., Green and Mitchell 1979). As a result, given identical accounting performance data, performance can be evaluated differentially depending on the causal attributions evoked by the manager to explain the data. Attribution theory posits that individuals do not react directly to the behavior of others but first go through an intermediate process of attributing behavior to its cause (Jones et al. 1972; Birnberg et al. 1977; Shields et al 1981; Tongtharadol et al. 1991). These attributions can be to internal factors, such as to the amount of effort or level of ability thought to be possessed by the target person. Or, these attributions can be to external factors, such as to luck or task difficulty. Once these attributions are formed, they affect the subsequent behavior of the individual toward the target person. Thus, attribution theory suggests that a subordinates behavior will lead to the supervisor making causal attributions to explain that behavior, which, in turn, will affect the supervisors subsequent actions with regard to the subordinate. For instance, an evaluator may attribute favorable performance from a subordinate to good fortune or an easy assignment (external) or to working hard or exceptional talent (internal). This attribution, in turn, will likely affect the evaluators assessment and rewarding of the subordinates performance. A number of studies examine factors and processes by which attributions are formed and the effects of supervisors attributions on performance evaluations. For example, Knowlton and Mitchell (1980) find that attributions to effort lead to more extreme evaluations than do attributions to ability. Other studies (Mitchell and Wood 1980; Gioia and Sims 1986) document that supervisors respond more punitively toward subordinates when they attribute poor performance more to internal factors rather than to external factors. In addition, Mitchell et al. (1981) have identified several moderating variables in the attribution process, including the supervisor-subordinate relationship and individual characteristics. They argue that the more a supervisor feels psychologically close (empathetic, for example) to a subordinate, the more likely the supervisor will make attributions that benefit the subordinate. In regards to individual characteristics, factors such as race or sex, level in the organization, or type of job are likely to influence the supervisors causal attributions. Some previous research (e.g., Regan et al. 1974) suggests that liking may be a moderating variable in the attribution model. This is because individuals attempt to maintain initial categorizations for people so that behavior is attributed to causes consistent with the existing classification. For example, when a liked subordinate does a good job or a disliked subordinate does a poor job, a supervisor may desire to attribute performance to internal factors in order to maintain his prior categorization of the employee as one who deserves to be liked or disliked. On the other hand, when a liked subordinate does a poor job or a disliked subordinate does a good job, the supervisor may be less willing to attribute performance to internal factors, and instead attribute performance to external factors. In this manner, the supervisor is able to maintain the stability of existing levels of liking. These arguments suggest the following hypotheses: H1a: When accounting performance information is positive, supervisors will attribute performance more to internal factors for a liked subordinate than for a disliked subordinate.

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H1b: When accounting performance information is negative, supervisors will attribute performance more to external factors for a liked subordinate than for a disliked subordinate. One generally assumes that when accounting performance numbers are good, this will have a positive effect on performance evaluation, and when accounting performance numbers are bad, this will have a negative effect on performance evaluation. Attribution theory, however, predicts that causal attributions alter this otherwise straightforward relationship. That is, attributions for a subordinates performance are expected to influence how a supervisor evaluates the subordinates performance. If attributions tend to be influenced by supervisors personal liking toward the subordinate as hypothesized in H1, then such attributions provide supervisors with rationales for providing performance evaluations consistent with their level of liking. As a result, given the good accounting performance, supervisors will be more inclined to give higher evaluations when they attribute the performance more to internal factors than to external factors. Similarly, given the poor accounting performance supervisors will tend to give lower evaluations when they attribute the performance more to external factors than to internal factors. Accordingly, the second hypothesis summarizes these expectations. H2a: When accounting performance information is positive, supervisors will give higher performance evaluations as they attribute the performance more to internal factors than to external factors. H2b: When accounting performance information is negative, supervisors will give lower performance evaluations as they attribute the performance more to internal factors than to external factors. Similarity-Attraction Theory Studies in similarity-attraction have been used to explain why individuals like each other when they are similar. Similarity-attraction theory describes a situation in which individuals tend to like others who are similar to themselves (Byrne 1961). This is based on the argument that people evaluate their own opinions, abilities, and behaviors by comparison with those of others. By evaluating oneself against others who are similar, an individuals self-concept is increased. The findings provided by a majority of studies are consistent with the prediction that people tend to like others who are similar to themselves in terms of attitudes, opinions, and demographic background (e.g., Pulakos and Wexley 1983; Judge and Ferris 1993). Aspects of similarity between manager and subordinate that are related to the work environment, such as work style, have received very little attention in the literature. One notable exception is a study by Deluga (1998), who investigated how similarity on the personality trait of conscientiousness affects performance evaluations. That studys findings indicate that the greater the similarity between a subordinate and manager, in terms of conscientiousness, the more positive is the managers evaluations of subordinate performance. Delugas (1998) study, however, did not measure attributions and is limited by social desirability since conscientiousness is generally considered a positive trait in our society and would be expected to influence performance evaluations accordingly. An individual trait that is neutral with respect to social is work style, based on Adaptor-Innovator theory (Kirton 1976, 1984; Goldsmith 1994). According to the theory, adaptors tend to seek solutions that apply accepted, normal procedures and they prefer to do things better. On the other hand, innovators tend to offer new solutions that change the context and they prefer to do things differently. Both work styles represent valid approaches to problem solving. Research in this area mainly focuses on the relationship between work style and managerial competence, job performance,

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and actual employee turnover (e.g., Chan 1996). A recent study, however, applied Adaptor-Innovator theory to an accounting context to examine the effect of style fit on job satisfaction in audit and consulting services (Summers et al. 2000), as shown in Table 1. No study to date has investigated work style in the context of performance evaluation or the effect of work style similarity between supervisor and subordinate on their interpersonal liking or attraction. According to similarity-attraction theory (Byrne 1971), to the extent that a subordinate employs a work style that is similar to the supervisor, such a similarity will be perceived as being rewarding and lead to positive feelings toward this subordinate. It follows that liking toward the subordinate is influenced by that subordinates work style when that work style is similar to the work style of the supervisor. The third hypothesis summarizes this expectation: H3: Similarity in adaptor-innovator work style between a supervisor and a subordinate positively influences the degree to which the supervisor likes the subordinate.

We develop the above hypothesis by combining the basic models of attribution and similarityattraction, suggesting that work style similarity between supervisor and subordinate through liking is a moderating variable in the attribution model. The implication of all three hypotheses together is that accounting data will be used differently for performance evaluation purposes, depending on how similar the supervisor and subordinate are in terms of work style. METHOD Design and Task The experiment employed a between-subjects, random factorial design. The two independent variables, accounting information and subordinate work styles, were manipulated at two levels while one additional independent variable, supervisor work style, was measured using self-reported scales. The dependent variables were (1) liking toward subordinate (LIKING), (2) causal attributions for the performance (ATTRIB), and (3) evaluation of subordinate (EVAL).
TABLE 1 Work Styles of Adaptors and Innovators Adaptors Employs disciplined, precise, methodical, efficient approach Is concerned with resolving problems rather than finding them Is an authority within structured situations Seeks to resolve problems with tried and accepted means Produces few ideas, generally aimed at improving existing system Values continuity, stability, consensus, and group cohesion Capable of doing routine work for long periods Provides a safe base for the innovators riskier operations
Source: Summers et al. (2000).

Innovators Approaches tasks from unusual angles Discovers problems and discovers avenues of solution Takes control in unstructured situations Treats accepted means with little regard Produces numerous ideas, some of which appear unsound, generally aimed at changing the existing system Is catalyst to settled groups; irreverent of consensus, custom, and group norms Has little tolerance for routine and structure Provides the dynamics to bring about periodic radical change

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Subjects were provided with a short decision case involving a hypothetical manufacturing company in which participants were placed in the role of the division manager. The division manager is told that he needs to evaluate the performance of a plant manger, Jack Smith, in preparation for awarding merit-based pay increases. Participants were given accounting information related to Jacks performance and a narrative description of Jacks work style as either an adaptor or innovator. Based on this information, the subjects were asked to answer eight questions regarding how much they would like Jack, to what causes they attribute Jacks performance, and how they would rate Jacks performance. Manipulated Variables Two variables, accounting information and subordinate work styles, were manipulated by providing subjects with different case scenarios. There were four different versions of the decision case corresponding to a 2 2 factorial design on these two variables. The details of these manipulations are described next. Accounting Information Accounting information was manipulated at two levels as (1) exceeding or (2) falling short of industry averages based on three accounting performance indicators. The three accounting performance measures used in this experiment are based on the work of Tuttle and Kershaw (1998). Under the condition of good accounting performance, participants were given the following data in which the plant outperforms the industry average on all three measures. Measure The Plant Industry Average On-Time Delivery (percent of on-time shipments) 96% 89% Delivery Quality (percent of defect-free shipments) 98% 95% Scrap Minimization 88% 84% (percent of finished unitsproduced compared to input units) Under the condition of poor accounting performance, participants were provided with the information that the plant has under-performed in comparison to the industry average on all three measures as follows: Measure The Plant Industry Average On-Time Delivery (percent of on-time shipments) 82% Delivery Quality (percent of defect-free shipments) 92% Scrap Minimization 80% (percent of finished units produced compared to input units) 89% 95% 84%

Subordinates Work Styles The subordinates work style was manipulated at two levels by providing subjects with a narrative description of Jack as either an adaptor or innovator. The description of the two work styles is adapted from the work of Kirton (1976) and Summers et al. (2000). As explained earlier and shown in Table 1, the two work styles describe the manner in which people prefer to solve workrelated problems. Individuals with the adaptor style tend to do things better and those with the innovator style prefer to do things differently. The styles are assumed to be on a continuum, with adaptors at one end and innovators at the other. As discussed earlier, both work styles represent valid approaches to problem solving in the workplace and, therefore, they are both assumed to be useful for success.

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Measured Variables Four variables were measured in this study, which include (1) supervisors work style used to compute a similarity score in relation to the manipulated work style of Jack, the subordinate, (2) liking toward subordinates (LIKING), (3) causal attributions for the performance (ATTRIB), and (4) evaluation of subordinates (EVAL). The supervisors work style was measured on the basis of their self-reported scores on a sevenitem Adaptor and Innovator (A-I) measure developed for this study. Each question is anchored by Adaptor characteristics (coded 1) on one side and Innovator characteristics (coded 9) on the other. The A-I measure matches the narrative description of Jack as either an adaptor or innovator based on the description of characteristics of adaptors and innovators styles in Kirton (1976), as adapted to an accounting context by Summers et al. (2000). Subjects response scores on the seven-item measure ranges from 1 to 9 in which 1 represents an extreme adaptor and 9 represents an extreme innovator. The subjects response is compared with the subordinates work style scores (as manipulated) that are coded as either 1 for the adaptor style or 9 for the innovator style to determine similarity. A formula used to compute the work style similarity score is: 9 |Rs Ms|, where Ms is the manipulated value and Rs is the response value. For example, if a subject responds with 1 (i.e., an extreme adaptor) on the seven-item A-I measure and has received a description of an innovator subordinate (coded 9), then the work style similarity score equals 1 (i.e., 9 |1 9| = 1). Work style similarity scores range from 9 to 1. Higher scores reflect similar work styles between evaluator and subordinate whereas lower scores represent dissimilar work styles.1 LIKING was measured by three items using a nine-point scale which was developed in this study. Subjects were asked to respond to (1) How much do you feel you would like Jack as a subordinate? (1 = not at all, 9 = very much), (2) What type of working relationship would you expect with Jack? (1 = very poor, 9 = very good), and (3) How likely do you think that you would get along with Jack? (1 = very unlikely, 9 = very likely). The variable ATTRIB was elicited with two measures (Dobbins and Russell 1986). Subjects were asked to rate, on a nine-point scale, the extent to which they feel the subordinates performance is caused by characteristics of the situation or something outside his control (= 1) versus Jacks personal characteristics or something about Jack (= 9). They were also asked to give, on a nine-point scale adapted from the work of Dobbins and Russell (1986), the extent to which they feel that the subordinates performance is caused by something about the subordinate or something outside the subordinates control. Prior studies have tended to view causal attributions as a single dimension, i.e., a continuum between internal versus external factors. The measure we employ is consistent with this idea in that a higher score represents a more internal attribution and a lower score represents a more external attribution. EVAL was measured by three items on a nine-point scale adapted from the work of Turban and Jones (1988). Subjects (1) rated the overall performance evaluation of the subordinate (1 = very low, 9 = very high), (2) gave the extent to which they consider the subordinate an effective employee. (1 = not at all, 9 = completely), and (3) responded to the likelihood that they would recommend a merit-based pay increase for the subordinate (1 = very unlikely, 9 = very likely).
1

Several design features were included to mitigate possible demand effects. First, two pages of the instrument were completed between the description of Jacks work style and our elicitation of the subjects personal work style. Second, prior to eliciting the subjects own work style we asked the respondents to Forget about the case for one moment. At this point, please respond about how you view yourself. Third, and most importantly, the dependent variables (performance evaluation and liking) were obtained prior to completing the innovator-adaptor scale. Hence, for demand effects to bias our results in favor of the hypotheses the subjects would systematically have to choose similar descriptions if they had previously liked Jack and rated his performance high. In addition, subjects would have had to systematically chosen dissimilar descriptions if they had previously not liked Jack and rated his performance low. We view this complicated scenario to be very remote and that the more likely explanation is the one suggested by the theory.

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Materials and Procedures The instrument consisted of four pages. The first page included a description of the decision case and the two variable manipulations (accounting information and subordinate work style). On the second page, subjects were asked to answer eight questions that are used to measure the three dependent variables (LIKING, ATTRIB, and EVAL). On the third page, subjects responded to questions regarding (1) the manipulations, (2) a single-item measure of subjects work style similarity to the person described in the case, and (3) demographic information. On the last page, subjects were given a seven-item measure regarding their own work style on a nine-point scale. Subjects Subjects in this study were 140 M.B.A. and P.M.B.A. (professional M.B.A.) students at a large university in the Southeast. Of the 140 responses, 1 was incomplete, producing 139 usable responses. Subject demographics suggest that these subjects had sufficient course and work background to understand the basic accounting information and decision task. Random assignment of the subjects to one of the four treatments was performed to make the groups as comparable as possible. In addition, participation was voluntary and informed consent was obtained. Subjects were assured that their responses were confidential and anonymous. DATA ANALYSIS AND RESULTS This study employs a structural equation modeling analysis. The structural equation model has powerful advantages in that it allows multiple indicators of latent variables and therefore reduces the effect of random measurement error. An added benefit of the structural equation model is that it provides more information about the measurement properties of perceptual scales (Magner et al. 1996). Randomization and Manipulation Checks Prior to model and hypothesis testing, a preliminary analysis was conducted to assess the effectiveness of the randomization process. Chi-square tests for differences in gender and age across manipulated versions of the decision case are not significant (p < 0.78 and p < 0.73, respectively). In addition, 2 2 ANOVA tests were performed for the continuous demographic variables: the number of years of full-time work experience, maximum number of subordinates supervised, and types of jobs. Independent variables are accounting performance data at two levels (poor, good) and the subordinates work style (adaptor, innovator). In this analysis, no demographic variable differs significantly (all p-values > .10) across treatment conditions. Combined, the Chi-square test and analysis of variance suggests that randomization was successful. Subjects answered a manipulation check question by identifying the accounting performance data they received in the case. All of the subjects (100 percent) correctly identified the accounting performance data they received in the case, suggesting that the subjects paid attention to the accounting data in the decision case. Table 2 presents descriptive statistics for the measured variables in the study including means, standard deviations, and the values of the skew index. The relatively small magnitudes of negative skew indices suggest no serious violation of the univariate normality assumption. Confirmatory Factor Analysis We conducted some initial analyses such as exploratory factor analysis and coefficient alpha test (Cronbach 1951). As reported in Table 3, overall, each item loads on the factor that is intended to be measured by that item except for L1, which loads on both EVAL and LIKING. One reason is that the underlying latent variables of EVAL and LIKING are correlated consistent with the prediction of this

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TABLE 2 Descriptive Statistics of Measured Variables Mean Variable Evaluation E1 E2 E3 Attribution A1 A2 Liking L1 L2 L3 Work Style W1 W2 W3 W4 W5 W6 W7 Good Info 7.18 7.04 7.33 6.85 6.28 6.93 6.91 6.90 5.60 5.69 5.54 5.34 6.06 5.22 5.69 Poor Info 5.60 5.78 5.10 6.10 5.46 5.69 6.26 6.28 5.58 5.40 5.29 5.15 6.01 5.26 5.99 Standard Deviation Good Info 1.18 1.43 1.51 1.72 1.82 1.52 1.59 1.43 2.13 2.26 2.30 1.92 2.07 2.22 2.29 Poor Info 1.40 1.51 1.73 2.10 1.91 1.77 1.70 1.74 1.91 2.15 2.17 1.91 1.87 2.30 2.40 Skewness Good Info 0.64 0.82 1.21 1.26 0.72 0.56 0.82 0.52 0.32 0.57 0.61 0.28 0.29 0.24 0.20 Poor Info 0.54 0.61 0.25 0.80 0.30 0.38 0.55 0.79 0.71 0.27 0.55 0.29 0.21 0.23 0.76

Work style (W1W7) measure is developed in this study based on Summers et al. (2000) (see Table 1). E1 = the overall performance evaluation of the subordinate; E2 = the extent to which the subordinate considered an effective employee; E3 = the likelihood the subordinate recommended for a merit-based pay increase; A1 = the extent to which the subordinates performance is attributed by personal characteristics or by characteristics of the situation; A2 = the extent to which the subordinates performance is caused by something about the subordinate or by something outside his control; L1 = how much you feel you would like the person as a subordinate; L2 = type of working relationship you expect with the subordinate; and L3 = the likelihood you would get along with the subordinate.

study. In addition, coefficient alpha for all four factors are between 0.80 and 0.92, demonstrating an acceptable degree of internal consistency for the various measures (Nunnally 1978). After the initial analysis of dimensionality of constructs and reliability of measures, structural equation modeling (SEM) was used to test the proposed theoretical model. The analysis follows a two-step approach recommended by Anderson and Gerbing (1988). With this approach, the first step involves using confirmatory factor analysis (CFA) to provide evidence about whether the measurement model fits the data, to further assess the reliability of constructs and indicators, and to provide a confirmatory assessment of convergent validity and discriminant validity (Campbell and Fiske 1959). Fit of the Measurement Model A number of goodness-of-fit indices recommended by Hatcher (1994), Kline (1998), and Hu and Bentler (1998) were examined to evaluate the model fit. These indices include 2/df, which has the cutoff value of 2.0 (Hoetler 1983); RMSEA, which has a maximum acceptable level of 0.06 (Hu and Bentler 1998); NNFI and CFI, which have minimum acceptable levels of 0.90 (e.g., Bentler and Bonett 1980) or 0.95 (Hu and Bentler 1998).
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TABLE 3 Exploratory Factor Analysis and Coefficient Alpha Variable Similarity S1 S3 S7 S5 S2 S4 S6 Evaluation E3 E1 E2 Liking L1 L2 L3 Attribution A1 A2 Eigenvalue Coefficient Alpha Factor 1 0.8203 0.7664 0.7661 0.7614 0.6936 0.6856 0.5724 0.0261 0.0603 0.0702 0.0081 0.0029 0.0129 0.0172 0.0236 5.74 0.90 Factor 2 0.0358 0.0954 0.0323 0.0955 0.1256 0.1183 0.0319 0.8812 0.8462 0.8375 0.4636 0.2561 0.2247 0.0523 0.0661 2.24 0.92 Factor 3 0.0758 0.1868 0.1363 0.0936 0.0373 0.1652 0.2603 0.0579 0.1229 0.0745 0.4641 0.7227 0.7213 0.0021 0.0080 1.25 0.89 Factor 4 0.0242 0.0458 0.0530 0.0258 0.0178 0.0110 0.0258 0.0379 0.0025 0.0090 0.0443 0.0361 0.0198 0.7679 0.7551 0.49 0.80

Subjects response scores on the seven-item work style measure (W1W7) ranges from 1 to 9 in which 1 represents an extreme adaptor and 9 represents an extreme innovator. These response scores are compared with the manipulated work styles (as either 1 for adaptor or 9 for innovator) of subordinates to determine similarity scores (S1S7). A formula used to calculate the work style similarity score is: 9 |Rs Ms|, where Ms is the manipulated score and Rs is the response score. Work style (W1W7) measure is developed in this study based on Summers et al. 2000 (see Table 1). Refer to Table 2 for definitions of the items A1A2, E1E3, and L1L3.

The results of these fit indices indicate that the measurement model reasonably fits the data as 2/df ratio and RMSREA are 1.438 and 0.0563, and NNFI and CFI are 0.9600 and 0.9680, respectively. These findings show that the measurement model provides a good fit to the data. A number of tests were then conducted to assess its reliability and validity as described next. Assessing Reliability One important advantage offered by confirmatory factor analysis is the ability to assess the reliability of constructs and indicators. First, indicator reliability is defined as the square of the correlation between a latent factor and that indicator (Hatcher 1994). As shown in Table 4, column 4, most measures display relatively high reliability (i.e., the indicator reliabilities are between 0.602 and 0.830 for all indicators measuring EVAL, ATTRIB, and LIKING). A few individual indicators measuring the construct of work style similarity reveal marginally low reliabilities (i.e., between 0.456 to 0.640). Therefore, it is necessary to perform composite reliability test (which assesses the internal consistency of the indicators measuring a given factor) to see whether the reliability of this construct is acceptable. The results of composite reliability are reported in Table 4, column 5. It is clear that all composite reliability exceeds 0.70, the preferably acceptable level of reliability for instruments used in research (Hatcher 1994).

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TABLE 4 Properties of the Measurement Model Construct and Indicators Evaluation E1 E2 E3 Attribution A1 A2 Liking L1 L2 L3 Similarity S1 S2 S3 S4 S5 S6 S7
a

Standardized Loading 0.9111 0.9024 0.8640 0.7759 0.8663 0.8080 0.9018 0.8564 0.8000 0.7249 0.8106 0.7152 0.7554 0.6751 0.7199

Indicator t-valuea 13.92 13.69 12.73 6.23 6.54 11.20 13.28 12.24 10.96 9.52 11.18 9.35 10.09 8.65 9.43

Composite Reliability 0.830 0.814 0.747 0.602 0.751 0.653 0.813 0.733 0.640 0.526 0.657 0.512 0.571 0.456 0.518

Reliability 0.922

0.806

0.892

0.897

All t-tests for factor loadings are significant at p < 0.001. Refer to Tables 2 and 3 for definitions or descriptions of the items A1A2, E1E3, L1L3, and S1S7.

Evaluating Convergent and Discriminant Validity In this study, convergent validity is first assessed by examining the factor loadings in a confirmatory factor analysis. Table 4 presents the standardized factor loadings (column 2) as well the corresponding t-values (column 3). As shown in Table 4, t-values range from 6.23 to 13.92, indicating that each indicators estimated coefficient on its construct factor is significant, thus supporting the convergent validity of those indicators. Further, a correlation analysis was performed to provide additional evidence of convergent validity. Discriminant validity is then evaluated to test the extent to which measures or indicators intended to measure different constructs are not highly related. A Chisquare difference test was conducted to assess discriminant validity. The results show that 2 values are statistically higher for the constrained models than for the unconstrained models ranging from 79.36 to 281.35, given one degree of freedom, suggesting that discriminant validity is achieved. In conjunction with the Chi-square difference tests, the correlation matrix also evidences discriminant validity. Together, the results provide reasonably strong evidence for the overall fit of the measurement model and reliability of the constructs and indicators as well as convergent and discriminant validity of the indicators. Analysis of Structural Equation Model In this phase, the hypothesized causal relationships between the latent variables, i.e., the theoretical model, is tested. The proposed structural model is first analyzed to determine if the model fits the data and if any model modification is reasonable and necessary.

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Proposed Structural Model The procedures used to assess the structural model fit are similar to those performed in confirmatory factor analysis. Mplus software was used to perform the SEM (Muthn and Muthn 1998), because it provides the opportunity to perform between group analyses. The results of fit indices generated by Mplus for both good and poor accounting information groups, along with standardized path coefficients, are presented in Figure 1. The ratio for 2/df is 1.50 and is below the cutoff of 2.0 recommended by Hoetler (1983), suggesting that the model provides an acceptable fit to the data. NNFI and CFI are 0.916 and 0.926, respectively, which exceed the 0.90 criteria (e.g., Bentler and Bonett 1980) but not the 0.95 criteria (Hu and Bentler 1998). Further, RMSEA is 0.085, indicating that the proposed model does not quite fit the data. These indices suggest that the fit between model and data could be improved by appropriately revising the structural model. Revised Structural Model The results from the output of the MODINDICES statement in Mplus suggest a significant decrease in the Chi-square value (p < 0.001) if a direct path from LIKING to EVAL is added to the proposed model for both good and poor information groups. Adding this path is consistent with established literature that people tend to give liked subordinates higher performance evaluations than disliked subordinates. Because there is both theoretical and statistical justification for adding this path, the proposed structural model was modified to include the new path and the revised model was then reestimated. Chi-square difference tests between the proposed models and the revised models were performed to examine whether the addition of the new path from LIKING and EVAL under both good accounting data and poor accounting data result in a significant improvement in the revised models fit. As expected, the Chi-square difference is significant (p < 0.001), indicating that the modification substantially improves the models fit. Further, the fit indices for the revised model are all at acceptable levels providing additional evidence that the revised model demonstrates a better fit to the data. Figure 2 presents standardized path coefficients of the revised models as well as the model fit indices. Hypothesis Tests Having obtained a revised structural model with a good fit, the path coefficients that specify the hypothesized causal relationships were tested. Testing Hypothesis 1 The first hypothesis predicts an interaction of personal liking and accounting performance data on causal attributions and subsequently on performance evaluation. The analysis follows a two-step approach to test the interaction effect as recommended by Kline (1998) and Jaccard and Wan (1996). The first step provides evidence on how well the model fits the data when simultaneously analyzing both good and poor accounting performance groups and when estimating coefficients without constraints across groups. The fit indices suggest that the unconstrained model provides a reasonable fit. Given that the unconstrained model displays a reasonable fit, the analysis proceeds with step 2. Step 2 involves a re-examination of the model with a constraint imposed to reflect the interaction effect. Specifically, the model is reassessed with the added constraint that path coefficients from LIKING to ATTRIB be equal in both good and poor accounting data groups. If there is no interaction effect and the two path coefficients are set equal, then such a constraint will not adversely affect model fit relative to the analysis in step 1. However, the relative fit of the constrained model is statistically worse than that of the unconstrained model. This finding suggests that an interactive effect exists between accounting performance data and personal liking on supervisor causal attributions.

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FIGURE 1 Fit Indices amd Standardized Path Coefficients of the Proposed Structural Equation Model Panel A: Good Accounting Performance Data

L1 S1 S2 S3 S4 S5 S6 S7 A1
Panel B: Poor Accounting Performance Data
.50

L2

L3

Liking
E1
.78

Similarity

Evaluation
.98

E2 E3

Attribution

A2

L1 S1 S2 S3 S4 S5 S6 S7 A1
.39

L2

L3

Liking
E1
.60

Similarity

Evaluation
.55

E2 E3

Attribution

A2

All path coefficients are significant (p < 0.001). Refer to Tables 2 and 3 for definitions or descriptions of the items A1A2, E1E3, L1L3, and S1S7. n = 139; 2 = 278.18; df = 185; 2/ df = 1.50; RMSEA = 0.085; NNFI = 0.916; and CFI = 0.926.

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FIGURE 2 Fit Indices and Standardized Path Coefficients of the Revised Structural Equation Model Panel A: Good Accounting Performance Data

L1 S1 S2 S3 S4 S5 S6 S7 A1
.49

L2

L3

Liking

0.60

E1
.46

Similarity

Evaluation
0.39

E2 E3

Attribution

A2

Panel B: Poor Accounting Performance Data

L1 S1 S2 S3 S4 S5 S6 S7 A1
.39

L2

L3

Liking

0.67

E1
.49

Similarity

Evaluation

E2 E3

Attribution

.10 (n.s.)

A2

All path coefficients are significant (p < 0.01) except one designated n.s. Refer to Tables 2 and 3 for definitions or descriptions of the items A1A2, E1E3, L1L3, and S1S7. n = 139; 2 = 233.8; df = 183; 2/df = 1.28; RMSEA = 0.063; NNFI = 0.954; and CFI = 0.960.

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Hypothesis 1a predicts that the supervisor will attribute performance more to internal factors for liked subordinates who have good accounting performance data and for disliked subordinates who have poor accounting performance data. Similarly, H1b predicts that the supervisor will attribute performance more to external factors for liked subordinates who have poor accounting performance data and for disliked subordinates who have good accounting performance data. The path coefficients from LIKING to ATTRIB under both accounting performance data conditions are central to these hypothesis tests. As Figure 2 shows, the path coefficients are significant (p < 0.01) and in the expected directions. The results are consistent with the prediction that subjects made attributions for the subordinates performance based on the interaction of accounting performance data and their personal liking toward the subordinate. As a consequence, the subjects attributed performance more to internal factors for a liked subordinate and more to external factors for a disliked subordinate when the subordinate performs well (positive accounting data). Similarly, the supervisor attributes performance more to external factors for a liked subordinate and more to internal factors for a disliked subordinate when the subordinate does not perform well. Thus, H1a and H1b are supported. Testing Hypothesis 2 The same procedure is followed to examine the interaction of accounting performance data and causal attributions on performance evaluation. The results show that imposing the constraint adversely affects model fit, indicating that an interaction exists between accounting performance data and causal attribution on performance evaluation. Hypothesis 2a predicts that the supervisor will give higher evaluations when attributing good accounting performance more to internal factors than to external factors. As an extension of H1a and H1b, H2a focuses on the relationship between causal attribution and performance evaluation given the positive accounting data. As shown in Figure 2, the path coefficient from ATTRIB to EVAL under the good data is significant (p < 0.001) as the coefficient is equal to 0.39 with a t-value of 3.59, suggesting that the supervisor gives better evaluations based on the perceived attribution of internal factors given the good accounting data. Thus, H2a is supported. Hypothesis 2b predicts that the supervisor will give lower evaluations when attributing poor accounting performance more to internal factors than to external factors. Like H2a, H2b focuses on the relationship between causal attribution and performance evaluation but in the presence of negative accounting data. Accordingly, a significantly negative path coefficient from ATTRIB to EVAL under the condition of poor accounting data would support H2b. However, as shown in Figure 2, the path coefficient from ATTRIB to EVAL, given the poor accounting performance data, is not significant. This result indicates that attributions do not affect performance evaluation when the subordinate does a poor job. Thus, H2b is not supported. Further analysis of the path from LIKING to EVAL reveals that the path coefficient from LIKING to EVAL is 0.60 (p < 0.001) under the good information condition and 0.67 (p < 0.001) under the poor information condition. It is apparent that the direct effect of LIKING on EVAL is not only significant, but also the strongest among all causal relationships hypothesized in this study (see Figure 2 and Table 5). This effect is particularly pronounced when the poor accounting performance data is given, thus suggesting a reason for the insignificant relationship between LIKING and ATTRIB in this situation. When a subordinate does a poor job, the supervisor attributes performance to external factors if he likes the subordinate and to internal factors if he dislikes the subordinate. Such attributions, however, did not mediate the influence of LIKING on EVAL in the presence of negative accounting data. Attributions, thus, mediate the relationships between liking and evaluation when accounting information indicates that the subordinate does a good job but not when a subordinate does a poor job.

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TABLE 5 Standardized Direct Effects, Indirect Effects, and Total Effects Linkage Good Accounting Performance Data Work style similarity to Liking Work style similarity to Attribution Work style similarity to Evaluation Liking to Attribution Liking to Evaluation Attribution to Evaluation Poor Accounting Performance Data Work style similarity to Liking Work style similarity to Attribution Work style similarity to Evaluation Liking to Attribution Liking to Evaluation Attribution to Evaluation Direct Effect 0.49 0.23 0.38 0.45 0.60 0.39 0.39 0.20 0.28 0.49 0.67 0.10 0.05 0.17 Indirect Effect Total Effect 0.49 0.23 0.38 0.45 0.77 0.39 0.39 0.20 0.28 0.49 0.71 0.10

Testing Hypothesis 3 Hypothesis 3 predicts that a supervisor will like a subordinate to a greater extent when work styles between the supervisor and the subordinate are similar. As indicated in Figure 2, the path coefficient from the latent variable of work style similarity to LIKING is 0.49 with the t-value of 3.90 under positive accounting data and 0.39 with the t-value of 2.99 under negative accounting data. Consistent with the hypothesis, the coefficients for this relationship are positive and significant (p < 0.001 and p < 0.01, respectively), suggesting that supervisors like subordinates whose work styles are similar to their own. Therefore, H3 is supported. DISCUSSION The results of this study provide evidence that interpersonal factors such as work style similarity and personal liking influence how supervisors use accounting information when they make performance evaluation decisions. First, the more similar in work style, as measured by adaptor-innovator work style scale, the more the supervisor tended to like the subordinate. This effect holds true regardless of whether the subordinate does a good job or a poor job. Second, the results demonstrate that liking has a direct effect on the kind of causal attributions an evaluator makes to explain why accounting performance information is negative or positive. Third, beyond the results that a supervisors causal attributions for a given accounting performance are influenced by the supervisors liking for the subordinate, the findings further indicate that the supervisor gives higher evaluations when attributing a good accounting performance more to internal factors than to external factors. This result is consistent with the notion that causal attributions provide supervisors with rationalizations that enable them to maintain their view of the subordinate when evaluating the subordinates performance. Finally, the results suggest that liking appears to be one of the most important factors on the supervisors evaluation. It is interesting to note that supervisors make attributions for subordinate performance, and then use this attribution together with their liking for the subordinate to evaluate performance only when the subordinate does a good job (not when the subordinate does a poor job). One possible explanation for this finding is that what matters for performance evaluation is not only causal attribution, but also how much confidence the supervisor has in the attribution. When the

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subordinate does a poor job, the supervisor may have less confidence in this attribution and therefore such an attribution may have less influence on performance evaluation. As a result, it seems to be reasonable that a direct connection exists between liking and performance evaluation. Another possible explanation is that liking may occur early in the evaluative process and affect evaluation directly when the subordinate does not perform well and that we tend to see those we like as somewhat better than they actually are (Lott and Lott 1972, 139). Further, when asked to give the criterion they used to evaluate the subordinate, some participants responded as follows:
my personal beliefs/feelings 70% personal characteristics, 30% performance numbers what I thought about his work ethic compared Jack to my work habits my own experience I like people willing to look outside the box and be creative

These comments suggest that subjects own feelings toward the subordinate sometimes may play a more important role in the performance evaluation. Further research is needed to examine these possibilities. This study is an initial attempt to combine two separate research streams in order to examine how managers use accounting performance information to evaluate their subordinates. In this regard, the study is significantly different from much of the existing performance measurement research in accounting. Whereas prior studies primarily focus on the choice of accounting performance measures or the improvement of these measures, our study emphasizes the psychological aspect of supervisors behavior while using objective accounting performance measures. The findings in the study suggest that interpersonal factors, such as similarity in work style, interact with accounting numbers to have a powerful impact on the performance evaluation process, thus leading to very different outcomes. In addition to the factors we examined, other factors may affect decision-makers evaluation of their subordinates. For example, innovators might see the job as requiring more innovator-type skills, whereas adaptors might see the job as requiring more adaptor-type skills. Such beliefs might provide a potential justification for evaluating the performance of subordinates with similar problem-solving approaches more favorably. Future studies may wish to examine more deeply the effects of individual differences in performance evaluations. This study is also a first attempt to measure Adaptor-Innovator as a specific work style variable by adapting the description of the two problem-solving styles from Kirton (1976) and Summers et al. (2000). The seven items developed in this study are a significant reduction from the 32 items used in the original Kirton (1976) measure. The findings demonstrate a high degree of reliability and validity for the measures developed and used in the current study. It also extends prior studies that show that similarity, in terms of conscientiousness, affects performance evaluations. In prior studies, conscientiousness is a valid and relevant variable to performance evaluations so that similarity and relevance are confounded. Work style, however, is not a performance-relevant variable, in that both adaptive and innovative styles are simply means to an end and not the end in themselves. Hence, innovatoradaptor work style provides a stronger test of similarity theory in a performance evaluation task and in a work setting. This study suggests that supervisors draw inferences about the causes of subordinates performance and act in accordance with these inferences. These influences were based, in part, on interpersonal factors and affected the way objective accounting performance data were used. To some extent,

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the goal of many performance evaluation systems is to remove the effect of factors unrelated to performance from the evaluation process. Accounting performance data are supposed to represent an objective measure of performance that is free of interpersonal factors irrelevant to performance. The findings, however, suggest that interpersonal factors do influence the way that managers use accounting data to make evaluation decisions. The consequence of such evaluations can have negative effects on organizations by reducing morale and leading to lower effort and productivity. It is crucial, therefore, for organizations to recognize such influences.

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