| Trust is an increasingly critical determinant of organizational success. This dissertation consists of three studies investigating the relationship between firms' accounting processes and interpersonal trust. Using survey data from Great Place to WorkRTM Institute, the first study investigates the association between trust (i.e., employees' trust in management) and three aspects of financial reporting: accruals quality, misstatements, and internal control quality. Results suggest that trust is associated with better financial reporting quality. However, these effects are not uniform across companies. Consistent with trust improving financial reporting quality through improved information production and information sharing, results suggest that trust is significantly associated with financial reporting quality in relatively decentralized firms, but not in firms that are relatively centralized.;The second study extends prior research that finds a positive effect of controls on trust in collaborative settings by investigating the effect of controls on trust in a non-collaborative setting, where reciprocity is less likely to influence behavior. Using a two-stage game in which half of the participants ("managers") work together in a cooperative task and the other half of the participants ("observers") observe the managers' behavior, this study finds support for the concern that reciprocity can explain a significant portion of the control's effect on individuals' behavior in the collaborative setting; however, the control still has a positive effect on trust in the non-collaborative setting, where reciprocity is less prevalent.;The third study investigates the effect of group-level controls on employee effort and coworker trust. Prior research is limited to controls in one-on-one settings (i.e., one individual imposing a control on another). In contrast, controls in the workplace are often imposed at the department, or organizational level, where they are less clearly a signal of mistrust. Despite this ambiguous signal, I find that restrictive controls have a negative effect on employee effort even when the control is imposed at the group level. However, I find that group-level controls have a significantly more positive effect on coworker trust than individual-level controls. Finally, I find that controls have a more negative effect for more trustworthy employees, in terms of both employee effort and coworker trust. |
