Psychological impacts on risk reporting in German public sector companies.

This study uses an approach of grounded theory with mixed methods and sources. The aim is to start and inform the debate about psychological influences on risk reporting in public sector companies and develop some reform proposals for risk reporting which can also inform the debate about Corporate Governance Code. The part of this work devoted to cognitive theory explores psychological impacts on managers' risk reporting, specifically in times of stress. It considers cognitive influences on compliance or non-compliance with management contracts with regard to risk reporting in risky situations, and so provides insights into the impact of important factors which have so far been largely neglected.By taking a psychological and situational approach it highlights the relevance of normal cognitive structures for managers' reporting practices during times of crisis, and therefore informs current corporate governance debates focusing on pecuniary incentives to enforce managers' best practice risk reporting.The research focus was drawn from the author's work experience as a manager in public-sector firms, and is concerned with risk reporting specifically in the public sector. This is distinguished from the private sector mainly by the almost total "absence" of the owner, i.e. the citizens. Instead, public firms are characterized by multiple agent relations, persons contracted for specific tasks, namely public managers, public shareholders, boards, and auditors. This constellation increases the possibilities of non-compliance with tasks - in this case delay or distortion of risk reporting - because even if this type of behaviour might contribute to firms being financially harmed, the agents will not lose their own money as they are not the owner of public firms.These specific features of public firms are as yet under-researched - especially the psychological influences on risk reporting in public sector companies - had not been researched before at all.Because of the lack of sources, in accordance with grounded theory new data was generated through interviews with managers of public real estate firms in Berlin as well as public shareholders, high-level board members, and auditors, providing information on their viewpoints on risk reporting and its control as well as main issues encountered. This interview outcomes from different viewpoints were triangulated with each other, with relevant literature and analysis of the company corporate disclosure.The combination of field research with new approaches from Behavioural Economics contributes to a more thorough understanding of practices of risk reporting, the psychological impacts and control. By taking resilient psychological issues into account reforms can be reviewed to find more practical solutions to deal with the remaining challenges.