Debiasing as a powerful management accounting tool? Evidence from German firms

Abstract

Purpose The purpose of this paper is to investigate if and how firms approach debiasing and what determines its success. In particular, this study examines if debiasing is effective in reducing cognitive decision biases. This paper also investigates organizational characteristics that determine the effectiveness of debiasing. Design/methodology/approach This study uses survey data from German firms to answer the research questions. Target respondents are individuals in a senior management accounting function. Findings In line with the hypotheses, this paper finds that debiasing can reduce cognitive biases. Moreover, this study finds that psychological safety not only directly influences the occurrence of cognitive biases but is also an important factor that determines the effectiveness of debiasing. Research limitations/implications This paper provides evidence that debiasing can serve as a powerful management accounting tool and discusses debiasing in the context of recent management accounting literature. This study also adds to the stream of research that investigates the role of psychological safety in organizations by highlighting its importance for successful debiasing. Practical implications This paper informs firms that use or intend to use debiasing about crucial determinants to consider when debating its implementation, i.e. psychological safety. This study also identifies risk management as a potential interface for the implementation of systematic debiasing. Originality/value While previous research primarily addresses specific cognitive biases and debiasing mechanisms using lab experiments, this is – to the best of the knowledge – the first study investigating cognitive biases and debiasing on a broad conceptual level using survey data.