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  • Journal of Accounting Research

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

By: C. X. Chen and Tatiana Sandino
  • Format:Print
  • | Pages:34
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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 datasets 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.

Keywords

Risk Management; Behavior; Compensation and Benefits; Societal Protocols

Citation

Chen, C. X., and Tatiana Sandino. "Can Wages Buy Honesty? The Relationship Between Relative Wages and Employee Theft." Journal of Accounting Research 50, no. 4 (September 2012): 967–1000.
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About The Author

Tatiana Sandino

Accounting and Management
→More Publications

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More from the Authors
  • The Impact of Subunit Culture Consistency on Employee and Customer Outcomes By: Jasmijn Bol, Robert Grasser, Serena Loftus and Tatiana Sandino
  • Buurtzorg By: Ethan Bernstein, Tatiana Sandino, Joost Minnaar and Annelena Lobb
  • From Online Content to Offline Results: Effects of a Best Practices Initiative on an Enterprise Social Network By: Shelley Xin Li and Tatiana Sandino
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