Abstract:
This paper proposes that a strong ethical environment will be effective in reducing the
tendency for managers to continue failing projects in both the presence and absence of agency
problems. The findings support these propositions, with a strong ethical environment found to
significantly reduce managers’ tendency to continue failing projects. Also, while agency
problem effects were still present under a strong ethical environment, their impact was similar
to the case of a weak ethical environment in the absence of agency problems. These findings
suggest that creating a strong ethical environment may be a highly desirable control option for
organizations generally.
