Accountability and referent Selection: Evidence from Chinese mutual funds

Abstract

Managers select referent organizations for accurate feedback, and also for favorable interpretations. Using Chinese mutual fund data, this study investigates the effect of manager accountability on referent selection. We find that fund managers with higher accountability pressure tend to select worse-off performing referents to show positive comparison results. Moreover, our results suggest that focal fund performance weakens the relationship between fund managers’ accountability pressures and the selection of worse-off referents. Finally, our results suggest that fund manager power weakens the relationship between accountability pressure of fund managers and the selection of worse-off referents. Our findings contribute to referent selection research on the Behavioral Theory of the Firm and enrich our understanding of how accountability influences managers’ self-evaluation processes.