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

Xiaoling Chen, Tatiana Sandino

Research output: Contribution to journalArticlepeer-review

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 data sets 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.

Original languageEnglish (US)
Pages (from-to)967-1000
Number of pages34
JournalJournal of Accounting Research
Volume50
Issue number4
DOIs
StatePublished - Sep 1 2012

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

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