| Agency theory, widely used in accounting research, assumes that the participants are motivated solely by self-interest. Moral reasoning theory, widely used in psychology research, has found that individuals' motivation depends upon their moral reasoning level. Individuals at a pre-conventional moral reasoning level are motivated by fear of punishment. Individuals at a conventional moral reasoning level are motivated by a desire to be in conformity with peer group and societal norms. Individuals at a post-conventional moral reasoning level are motivated by their personal moral code, regardless of peer group pressure and possible punishments. Therefore, the agency theory assumption of self-interest appears to contradict the conclusions of moral reasoning theory. This research investigates the apparent contradiction between these two widely accepted theories to determine if the agency assumption of self-interest holds true for all individuals.;A 2 x 2 x 3 factorial design was used. Student subjects were placed in an agency type setting and given the opportunity to increase their perceived rewards by engaging in self-serving behavior. Independent variables were the presence or absence of monitoring, group norms of "honesty" or "dishonesty," and the moral reasoning level of the individuals. The dependent variable was the amount of self-serving behavior observed, using multiple measures, in the actions of the subjects. Tests were made to determine if the subjects behaved as moral reasoning theory predicted, based upon their moral reasoning level.;Based on the results of this study, there is no evidence that an individual's moral reasoning level influences the amount of self-interested actions of that individual in an agency setting. Also, the amount of self-interested behavior among subjects in this study was not influenced by the presence or absence of monitoring. Finally, the amount of self-interested behavior of conventional moral reasoning level individuals was not found to be influenced by the norms of their groups. Therefore, the self-interest assumption of agency theory has not been discredited. |
