Performance Manipulation as a Reaction to the Prevalence of Gossip: The Role of the Self‐Monitoring Trait

ABSTRACT We examine how the prevalence of gossip about peers' performance (peer performance gossip), a form of informal communication, influences employees' performance manipulation. Gossip is often viewed as a mechanism that disciplines behavior and deters misconduct. Yet, it may also serve as a salient cue of social evaluation, heightening employees' concerns about appearing incompetent to others. We predict that the prevalence of peer performance gossip increases employees' fear of negative social evaluation, which in turn leads them to inflate their reported performance to protect their social image. We further predict that this effect is weaker for employees with higher self‐monitoring, as they are more adept at tailoring their behavior to social cues and managing impressions. Data from two field surveys and an experiment support our predictions. Peer performance gossip increases performance manipulation by heightening social image concerns, particularly among employees with lower self‐monitoring. We contribute to the accounting literature by uncovering a social motive for performance manipulation and highlighting how informal social dynamics can shape reporting behavior beyond formal control systems. Accordingly, leaders should explicitly consider gossip when designing compensation systems, training programs, and internal communication practices. If left unaddressed, gossip may encourage performance manipulation and distort performance evaluations.