Many accounting textbooks state that the opportunity cost of idle fixed assets is zero. A few exceptions refer to repair, overhaul, employee vacation and congestion, giving rise to positive opportunity cost. We show that in important and frequently encountered situations, idled assets have...

Why do people have ambiguity aversion, preferring, a gamble with a 50% chance of success to one whose expected probability of success is 50% but where that 50% is an unbiased estimate? The answer modelled here, in the spirit of the career concerns literature, is learning: a risk-averse person...

We experimentally examine how employees' employment horizons (long or short) and the performance measures in their incentive contracts (forward-looking or contemporaneous) affect employee effort allocation and performance. Consistent with economic theory, we find that the decision-influencing...

Using data from Ontario hospitals, we investigate the conjecture that the stickiness of costs would be greater for functions that relate to an organization's core competency. We find operating costs for the hospital as a whole are sticky. Moreover, we find higher stickiness in costs pertaining...

This paper traces the adoption process by top management of a performance evaluation system initiated by the financial controllers at the Research and Development site of leading multinational company. The research puts forward that the success of the change efforts depends on the nature of...

The analysis in this paper extends the single-agent/multi-task LEN model in Feltham and Xie (1994) to a multi-agent/multi-task context. A key feature of the paper is that we consider centralized contracting with both full and limited commitment. The former refers to settings in which the...

Research in budgeting suggests that subordinates may exhibit economically significant degrees of honesty, in spite of pecuniary incentives to do otherwise. This study continues the exploration of honesty in budgeting along two dimensions. First, unlike prior experiments, we measure the...

Lipton has about 50 branded product lines, each of which has a product-line income statement. For many years, the company had used trading profit as a key measure of performance; in recent years, however, other measures have been used, and now a radically different product-line Pamp;L has been...

Strategic cost management is deliberate decision-making aimed at aligning the firm's cost structure with its strategy and optimizing the enactment of the strategy. Alignment and optimization must comprehend the full value chain and all stakeholders to ensure long run sustainable profits for the...

We consider a principal-agent model where the agent is hired to take an action on behalf of the principal. The agent can exert costly effort to learn the true state of the world. If he fails to discover the state, he can end an inquiry to the principal who then can exert (additional) costly...