The influence of Personality, Ethical Climate, and Social Desirability Response Bias on Chinese Internal Auditors' Whistle-Blowing Judgments

Global standards setters and national regulators have both recognised the importance of whistle-blowing in preventing and detecting business wrongdoing. In addition, researchers have advocated that whistle-blowing has contributed significantly to efforts in improving corporate governance and in reducing business misconduct across countries. The aim of the the sisis to examine the influence of three factors, namely personality, ethical climate, and social desirability response bias on Chinese internal auditors' acceptance and likelihood of engaging in whistle-blowing. These three factors have been selected for examination in the three papers comprising this thesis because of their importance and relevance both globally and in China. This thesis is based on the "thesis by publication", and comprises three separate studies. This thesis includes an introduction (Chapter 1), three separate empirical studies (Chapter 2-4), and a conclusion (Chapter 5). Specifically, the three papers comprising this thesis are as follows.The first paper is entitled, "The Influence of Construal of Selfon Internal Auditors' Judgments on Whistle-Blowing: Evidence from China". This paper contributes to the literature by examining how an important antecedent of whistle-blowing, namely construal of self, influences Chinese internal auditors' judgments in the context of whistle-blowing. China provides a particularly unique environment because traditional cultural values such as collectivism, obedience, submission, and the fear of jeopardizing harmonious interpersonal relationships arelikely to influence whistle-blowing. Internal auditors have been selected as subjects because of the importance placed on them by regulators and enterprises in designing whistle-blowing systems. Construal of self has been selected for examination because it captures complex moral,cognitive processes experienced by individuals at both cultural and personality levels. This study develops and finds support for the hypotheses that, compared to independents, interdependent internal auditors are less accepting and less likely to engage in whistle-blowing.The results also show the presence of strong social desirability response bias among internal auditors. Given the existence of social desirability response bias, this study viii questions the findings from prior research where subjects are required to provide their judgments on complex ethical issues related to their relationships with their colleagues, superiors, and junior staff members. The second paper is entitled, "The Influence of Ethical Climate on Whistle-Blowing as an Internal Control Mechanism: Evidence from China". This paper contributes to the literature by providing empirical evidence on how an important antecedent, namely ethical climate, influences Chinese internal auditors' judgments on the acceptance and likelihood of engaging in whistle-blowing. The ethical context of whistle-blowing hasbeen selected because it is one of the most successful risk management frameworks for preventing and detecting business wrongdoing. China provides a particularly appropriate national context because of its unique social, political, and economic environment, which has faced rapid globalization, and where whistle-blowing is both important and controversial. Chinese internal auditors have been selected as subjects because regulators place significant importance on them in designing internal control systems centred around preventing wrongdoing and enhancing ethical practices. Ethical climate is considered to be the most important antecedent in examining whistle-blowing judgments because it influences both the psychological ethical decision-making process and subsequent behaviour in response to ethical dilemmas. Five ethical dimensions have been identified in the literature. However, the findings of this study show the existence of four ethical dimensions, namely instrumental, caring,rules,and law and code climates. Independence climate does not exist in the sample of this study. The objective of this study is to examine and compare how each of these four ethical climate dimensions is likely to influence whistle-blowing judgments. This study further contributes to the literature by examining cultural values embedded in Confucianism and Legalism that are compatible with various dimensions of ethical climate and which, in turn, are likely to encourage greater whistle-blowing intentions.This study also suggests that the intensity of influence of "harmony within hierarchy" and interdependence embedded in Confucianism on ethical climate is greater than that of Legalism. ix The findings of this study show that, compared to instrumental, rules, and law and code climates,caring climate results in the highest whistle-blowing intentions.Caring climate creates a supportive environment where employees believe that other organizational members are concerned with their well-being, and also provides a psychological safety feeling for employees. This study also suggests that together with caring climate, organizations may place a stronger focus on developing the rules and law and code climates to cultivate an ethical climate that can encourage employees to report wrongdoing.The third paper is entitled, "Construal of Self and Social Desirability Response Bias". Evidence based on social desirability response bias shows that individuals frequently hold inaccurate self-evaluations and form unjustifiable favourable self-views. One form of inaccurate self-evaluation is "holier-than-thou" perception bias. "Holier-than-thou" perception bias results in individuals believing that they are more ethical than other organizational members. This paper contributes to the literature by examining the influence of construal of self on "holier-than-thou" perception bias among Chinese internal auditors in the context of whistle-blowing. Construal of self has been selected for examination because it captures complex cognitive processes at both cultural and personality levels, and it distinguishes between inter dependents and independents. This study provides evidence that "holier-than-thou" perception bias exists among both interdependent and independent internal auditors. This study also finds support for the hypothesis that compared to independents, "holier-than-thou" perception bias is lower among interdependent internal auditors. Given the sensitive nature of ethics research, the presence of "holier-than-thou" perception bias may pose a serious threat to the validity of research findings.This study suggests that organizations may develop relevant training programs to work with inter dependents and independents to minimize "holier-than-thou" perception bias. The implications of each paper are as follows. The findings of the first paper may benefit local and multinational enterprises, regulators,and researchers who are interested in designing and xdeveloping more compatible whistle-blowing policies and procedures. The findings confirm that interdependent and independents coexist within contemporary China. This shift towards independence is likely to encourage greater acceptance and likelihood of engaging in whistle-blowing. The second paper provides empirical evidence of the importance of ethical climate in examining internal auditors' ethical judgments. The findings of the second paper have implications for global standard setters, professional bodies, and enterprises who are interested in designing and developing ethical climates that are more compatible with whistle-blowing policies and procedures.The findings of the third paper have particular implications for judgment and decision-making research in business. Given the sensitive nature of ethics research, the presence of "holier-than-thou" perception bias may pose a serious threat to the validity of research findings.The findings suggest that organizations may develop relevant training programs to work with inter dependents and independents to minimize "holier-than-thou" perception bias. This thesis makes significant and original contributions to the literature by providing empirical evidence on the influence of three important and relevant factors, namely personality, ethical climate, and social desirability response bias on Chinese internal auditors' acceptance and likelihood of engaging in whistle-blowing. The first paper will be submitted to Accounting, Organizations and Society, which is ranked A* by the Australian Business Deans Council (ABDC) Journal ranking. The second paper is currently under peer review and will be submitted to the Journal of International Accounting Research(American Accounting Association), which is ranked A by the ABDC. The third paper is under review by Journal of Management Studies, which is ranked A* by the ABDC