We extend Fisher, Peffer, and Sprinkle (2003) to investigate the effectiveness of a budget-based incentive contract to settings with alternate task characteristics. We first replicate their finding: when groups perform a task with an additive production function, a budget-based contract leads to...

This study explores the effect of employee organizational identity on developing effective compensation contracts to improve organizational performance. We adopt the economic identity theory to mathematically model and test this model using data from a Japanese listed firm that uses an...

Top management faces two key organizational design choices: (1) how much authority to delegate to lower-level managers, and (2) how to design incentive compensation to ensure that these managers do not misuse their discretion. Although theoretical accounting literature has emphasized the joint...

This study uses principal agent analysis to investigate how the principal’s use of performance measures in the agent’s compensation contract are affected by (1) links between performance measures and (2) substitute and complementary characteristics of an agent’s efforts. We show that the...

We consider a single-principal/multi-agent model to investigate the principal's preferences over delegated contracting. The analysis extends the single-agent/multi-task LEN model in Feltham and Xie (1994) to a multi-agent/multi-task context. We consider full-commitment contracts, i.e., the...

Prior literature suggests a positive relationship between financial reporting quality and the presence of accounting experts on audit committees. This study investigates the association between accruals quality and the characteristics of accounting experts and mix of accounting and...

A main prediction of agency theory is the well known risk-incentive trade-off. Incentive contracts should be found in environments with little uncertainty and for agents with low degrees of risk aversion. There is an ongoing debate in the literature about the first trade-off. Due to lack of...

A main prediction of agency theory is the well known risk-incentive trade-off. Incentive contracts should be found in environments with little uncertainty and for agents with low degrees of risk aversion. There is an ongoing debate in the literature about the first trade-off. Due to lack of...

The optimal contracts in portfolio delegation under general preferences are characterized when the underlying state variable is not contractible, and the principal must rely on the final returns of portfolios to design the compensation schemes for the fund manager. We show that the optimal...

We develop a model wherein a risk-neutral but ambiguity-averse principal contracts with a risk-averse agent who has a risky project. Both the agent and the principal can observe the project output and a public signal. The correlation between the output and the public signal is private...