| Psychological research demonstrates that humans have computational, perceptual, and cognitive limitations that affect decision-making. A set of these has been identified as framing effects. While Tversky and Kahneman (1981, 1986) have indicated the phenomenon to be robust, Fagley and Miller (1987), and Miller and Fagley (1991) have documented less robustness of framing effects. Economically based normative management accounting theories ignore the existence of such a phenomenon. This dissertation demonstrates the framing effect can exist in the management accounting domain, but that training and experience in a management accounting function mitigates the framing effect.; Hypothesizing that a problem solving schema developed as the result of training and experience in the management accounting domain, the framing effect was tested at its strongest point, in the context of a management accounting task. Transfer pricing decisions were selected as the mechanism through which an examination of a framing effect on those who perform management accounting functions was conducted.; This dissertation demonstrates that there is a smaller framing effect by management accountants than either business or non-business students on a previously tested non-domain specific questions. Further, when domain specific details were entered into the same problem, the framing effect essentially disappeared for the management accountants, while it remained for the business and non-business students.; If the primary purpose of management accounting is to assist internal management make decisions, frequently by summarizing and framing data for presentation to decision makers, then it is important to establish if the framing effect adversely influence staff working in management accounting functions. The lack of a framing effect supports the value of including management accountants in decision-making activities. Since the effect dissipates with training and/or experience, evidence is provided to support training efforts for those working in management accounting functions, which should benefit the firm as a whole. This type of research helps bridge the gap between academia and the practitioner community, while contributing to both the management accounting and psychology literatures. |
