Chong, Vincent K.Wang, Isabel Z.2025-07-082025-07-080963-8180ORCID:/0000-0002-7297-3384/work/168401731https://hdl.handle.net/1885/733766332Our paper examines when and how the delegation of decision rights and incentive-based compensation schemes (two organizational-design choices) and responsibility rationalization affect managers’ misreporting behavior. One hundred and twenty-nine managers from manufacturing firms in the US completed an online survey. Our results suggest that managers’ responsibility rationalization moderates the relationships between the delegation of decision rights and misreporting, and incentive-based compensation schemes and misreporting. Despite our results providing no evidence of a simple mediating role of incentive-based compensation schemes on the relationship between the delegation of decision rights and misreporting, we find support for a moderated-mediation effect. Specifically, our results demonstrate that the indirect effect of the delegation of decision rights on misreporting via incentive-based compensation schemes is conditional on managers’ responsibility rationalization. The theoretical and practical implications of our findings are discussed.Thanks are due to Mandy Cheng, Patricia Dechow, Shane Dikolli, Anne Lillis, Stijn Masschelein, Shuqing Luo, Naomi Soderstrom, David Solomon, Bin Srinidhi, Sally Widener (associate editor) and two anonymous referees for their helpful suggestions and comments on earlier drafts of this paper. Comments by participants at the 2015 Conference on Performance Measurement and Management Control, 2015 Asian-Pacific Conference on International Accounting Issues and 2016 Accounting and Finance Association of Australia and New Zealand (AFAANZ) Conference are appreciated. We thank Andrew Hayes and Geoff Soutar for their statistical advice. We gratefully acknowledge the research funding support from the AFAANZ Research Grant.33enPublisher Copyright: © 2018, © 2018 European Accounting Association.2019-03-1510.1080/09638180.2018.145277185044780671