Using data from FTSE 350 firms, we examine the factors influencing the explicit relative performance evaluation (RPE) conditions in performance-vested equity grants. We provide evidence on the use of RPE either to improve incentives by removing common risk or by linking greater vesting...

Although Holmstrom's informativeness criterion provides a theoretical foundation for the controllability principle and interfirm relative performance evaluation, empirical and field studies provide only weak evidence on such practices. This paper refines the traditional informativeness criterion...

This paper investigates strategic cost allocation in a single-period principal-agent setting, where the principal has two contractible performance measures available for contracting and the agent controls two productive tasks subject to moral hazard. In this setting, cost allocation shifts...

A challenge faced by many firms is how to encourage managers to undertake risk levels that are compatible with overall firm performance goals. Incentive compensation that is tied to financial returns is a common control mechanism that is meant to induce managers to strive for higher returns...

This paper examines whether boards exercise discretion to reduce costly ex post settling up of having to recover CEO cash compensation for unrealized gains that fail to materialize. We predict and support three empirical findings. First, we document greater cash pay-performance sensitivity for...

We investigate whether manufacturing practices and management accounting systems interactively affect performance. Specifically, hypothesized disordinal interactions between TQM or JIT and performance goals, performance measures, or performance-contingent rewards are tested. Support is found for...

This paper considers incentive provisions for a manager who makes investment decisions. The manager's performance measure can be based on current accounting information, cash flow, depreciation, book value, and current investment. We argue that Residual Income is the unique (linear) performance...

This paper provides a formal analysis of how managerial investment incentives are affected by alternative allocation rules when managerial compensation is based on accounting measures of income that include allocations for investment expenditures. The main result is that there exists a unique...

A number of academics, consultants and practitioners have pointed out the need to link management accounting and strategy more tightly, thus implying a more prominent role for accountants in the process of strategy assessment, control and revision. Strategic management accounting, strategic cost...