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Can Wages Buy Honesty? The Relationship Between Relative Wages and Employee Theft

Can Wages Buy Honesty? The Relationship Between Relative Wages and Employee Theft ABSTRACT In this study, we examine whether, for a sample of retail chains, high levels of employee compensation can deter employee theft, an increasingly common type of fraudulent behavior. Specifically, we examine the extent to which relative wages (i.e., employee wages relative to the wages paid to comparable employees in competing stores) affect employee theft as measured by inventory shrinkage and cash shortage. Using two store‐level data sets from the convenience store industry, we find that relative wages are negatively associated with employee theft after we control for each store's employee characteristics, monitoring environment, and socio‐economic environment. Moreover, we find that relatively higher wages also promote social norms such that coworkers are less (more) likely to collude to steal inventory from their company when relative wages are higher (lower). Our research contributes to an emerging literature in management control that explores the effect of efficiency wages on employee behavior and social norms. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Accounting Research Wiley

Can Wages Buy Honesty? The Relationship Between Relative Wages and Employee Theft

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Publisher
Wiley
Copyright
Copyright © 2012
ISSN
0021-8456
eISSN
1475-679X
DOI
10.1111/j.1475-679X.2012.00456.x
Publisher site
See Article on Publisher Site

Abstract

ABSTRACT In this study, we examine whether, for a sample of retail chains, high levels of employee compensation can deter employee theft, an increasingly common type of fraudulent behavior. Specifically, we examine the extent to which relative wages (i.e., employee wages relative to the wages paid to comparable employees in competing stores) affect employee theft as measured by inventory shrinkage and cash shortage. Using two store‐level data sets from the convenience store industry, we find that relative wages are negatively associated with employee theft after we control for each store's employee characteristics, monitoring environment, and socio‐economic environment. Moreover, we find that relatively higher wages also promote social norms such that coworkers are less (more) likely to collude to steal inventory from their company when relative wages are higher (lower). Our research contributes to an emerging literature in management control that explores the effect of efficiency wages on employee behavior and social norms.

Journal

Journal of Accounting ResearchWiley

Published: Sep 1, 2012

References