Human Bias in the Enforcement of Corporate Misconduct
Dr. Gerardo Pérez Cavazos
Assistant Professor of Accounting
Rady School of Management
University of California, San Diego
We study the effects of mood as a source of human bias on regulators’ enforcement decisions. We use weather at facilities at the time of an OSHA inspection to proxy for the OSHA compliance officers’ mood. We find that during periods of good mood due to sunny weather, the number of workplace safety violations and dollar penalties assessed by the officer decrease. These effects are more pronounced when OSHA officers conduct non-routine inspections that require more discretion. In turn, the effect of mood on enforcement decisions can be mitigated by increased monitoring by the regional OSHA office. Furthermore, after “good-mood” inspections, there is a greater incidence of workplace accidents. Overall, our findings show that regulators’ mood results in bias in the enforcement of corporate misconduct, which has real effects on workers’ safety.
