The Effect of Organizational Culture and Reward Frequency on Performance Misreporting

ABSTRACT Organizational culture and performance-based rewards are integral components of an organization’s managerial control system. Despite their importance, research on performance-based rewards within the context of organizational culture remains limited. Our study aims to fill this gap by examining how organizational culture interacts with frequency of performance-based rewards to influence performance misreporting, a prevalent agency problem in corporate settings. Using an experiment, we predict and find that performance misreporting is lower in a learning-focused (mastery orientation) culture compared to a performance-focused (performance orientation) culture. Additionally, we predict and find that performance-based reward frequency interacts with organizational culture to influence the level of misreporting. Specifically, our study highlights that a high reward frequency diminishes the potential benefit that a mastery orientation culture offers in curbing misreporting behavior.