Document Type : Original Article
Authors
1
Assosiate Prof., Department of Accounting, Faculty of Management and Accounting, Farabi Campus, University of Tehran, Qom, Iran
2
Assistant Prof., Department of Accounting, Faculty of Economics and Management, University of Qom, Qom
3
MSc., Department of Accounting, Faculty of Economics and Administrative Sciences, University of Qom, Qom, Iran
Abstract
OBJECTIVES: Despite the many proposed benefits of activity-based costing (ABC), sometimes some managers oppose implementing it. One important reason for this resistance is the effect of cost reallocations on managers’ motivation and evaluations and as a result, compensation. This study examines the impact of installing an ABC system on managers’ bonuses and their support for ABC implementation. Based on prospect theory, we predict that the negative effect on managers’ support for ABC in business units reporting less profit (less bonuses as a result) is greater than the positive effect on managers’ support in the more profitable units (more bonuses as a result).
METHODS: The present study uses an experimental research method ,29 individuals with professional accounting record and 33 students from this field as participants.
RESULTS: The results indicate that there is a significant difference in support in the event of changes in managers’ compensation, which confirms expectations based on the prospect theory. But there is no significant difference in support between professional participants and students. CONCLUSION: Consequently, companies attempting to install ABC need to pay special attention to its effects on managers’ bonuses and, consequently, their behavior.
KNOWLEDGE CREATION: Application of Prospect Theory in the field of activity based-costing system research, use of experimental research method and extension of literature on Activity Based-Costing system
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