This paper uses an experiment to investigate the effects of giving subordinates the possibility to return remaining budget to the organization on capital budgeting processes. We predict and find that when subordinates face no uncertainty when they submit their budget request, the possibility to...

This study investigates whether increasing a superior's span of control reduces the effectiveness of capital budgeting in eliciting truthful reports. We conduct an experiment based on a modification of the capital budgeting setting described by Antle and Eppen (1985). This modification...

Despite the benefits of delegating decision rights, it is claimed that firms under delegate decision-making authority. However, to date, this claim is untested. This paper explores the choice between information elicitation and delegation. We also examine the effect of this choice on the...

In an experiment, we model two stylized facts about capital budgeting practice, budgetary slack creation and delegation of decision-making authority. In our setting, under centralization, headquarters announces a budget, the division manager gives a cost report, and headquarters decides on the...

Despite the importance of target setting for firms, prior research offers mixed evidence regarding performance consequences of target difficulty levels. While experimental research suggests that setting difficult targets can increase performance, empirical evidence in field studies is mixed and...

Using an experiment, we investigate whether job candidates’ noncontractible effort promises increase their actual effort in the work relationship when the labor market is competitive. Due to promise-keeping preferences, individuals tend to keep promises even if doing so is costly. However,...

Prior research suggests that team member communication based on mutual monitoring can improve team performance by enabling the manager to more closely relate individual team members' contributions to their rewards. Given that diverse work settings affect the ability of team members to observe...

Executive Stock Option Programs (SOPs) have become the dominantcompensation instrument for top-management in recent years. Theincentive effects of an SOP both with respect to corporateinvestment and financing decisions critically depend on the design of the SOP. A specific problem in designing...

This study investigates via an experiment the effects of target transparency on managers' target setting decisions. Specifically, we investigate whether target transparency, which reflects employees' knowledge about each other's targets, affects managers' target setting decisions and whether...