Research indicates that bonus plans can provide effective incentives when managers use discretion to incorporate non-contracted information into performance evaluations. The use of managerial discretion, however, draws concern about whether non-contracted information is used appropriately in...

In the empirical estimation of the relation between CEO pay and both firm and peer performance, researchers typically include conventional accounting-based measures that reflect firm performance net of executive pay expense. We analytically show that when firms evaluate CEO performance relative...

Value based performance measures are intended to capture increases in shareholder wealth. At the same time they have to measure the realization of the returns initially planned for. To provide incentives for management to act in the interest of owners, bonus payments are often based on these...

This paper reports the results of an experiment that examines how incentive-based compensation contracts compare to flat-wage compensation contracts in motivating individual learning and performance. I use a multiperiod cognitive task where the accounting system generates information (feedback)...

In this paper, we develop sixteen testable propositions about variables that moderate a positive relation between monetary incentives and task performance. The propositions are derived from a comprehensive review of the literatures in accounting, economics, finance, management, psychology, and...

Accountants are concerned about the impact of incentive contracts on performance. Monetary incentives improve overall performance, but their effects on the components of performance are not well known. Performance on a repetitive task includes initial performance, subsequent improvement rate,...

Empirical studies commonly confirm that small firms enjoy efficiency advantages in generating innovation. However, the origin of this advantage remains poorly understood. This study explores the hypothesis that small firms enjoy advantages over large firms in crafting effective,...

We examine the performance of 84 firms that adopt value-based management (VBM) systems during the period 1984-1997. The typical firm significantly improves matched-firm-adjusted residual income after adopting VBM. This improvement persists for the five post-adoption years studied. After...

We show that project evaluation should be based on free cash flows at nominal prices. We present a case where the results from the constant price method are biased upwards and there is a risk to accept bad projects. It is a widespread practice to evaluate projects at constant prices. With an...