Performance Evaluation and Compensation Research: An Agency Perspective

Indjejikian, Raffi

doi:10.2308/acch.1999.13.2.147

Cited by 167 publications

(95 citation statements)

References 48 publications

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“…Pavlik et al (1993) usefully catalogue the empirical executive compensation literature. Finally, Indjejikian (1999) provides a discussion of the compensation literature from a managerial accounting perspective. We complement these existing papers by providing an evaluation of economics-based compensation research directly concerning accounting issues.…”

Section: Accounting Information and Managerial Incentive Contractsmentioning

confidence: 99%

Financial Accounting Information and Corporate Governance

2002

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This paper reviews and proposes additional research concerning the role of publicly reported financial accounting information in the governance processes of corporations. We first discuss research on the use of financial accounting in managerial incentive plans and explore future research directions. We then propose that governance research be extended to explore more comprehensively the use of financial accounting information in additional corporate control mechanisms, and suggest opportunities for expanding such research. We also propose cross-country research to investigate more directly the effects of financial accounting information on economic performance through its role in governance and more generally. r 2001 Elsevier Science B.V. All rights reserved.

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Section: Accounting Information and Managerial Incentive Contractsmentioning

confidence: 99%

Financial Accounting Information and Corporate Governance

2002

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“…As pointed out by Indjejikian (1999), managerial accounting research has long aimed at understanding the impact of risky pay on managerial behavior. We further such understanding by documenting an association between ESO risk incentives and explicit managerial risk-taking actions.…”

mentioning

confidence: 99%

Empirical Evidence on the Relation Between Stock Option Compensation and Risk Taking

Rajgopal¹,

Shevlin

1999

SSRN Journal

141

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We examine whether executive stock options (ESOs) provide managers with incentives to invest in risky projects. For a sample of oil and gas producers, we examine whether the coefficient of variation of future cash flows from exploration activity (our proxy for exploration risk) increases with the sensitivity of the value of the CEO's options to stock return volatility (ESO risk incentives). Both ESO risk incentives and exploration risk are treated as endogenous variables by adopting a simultaneous equations approach.We find evidence that ESO risk incentives has a positive relation with future exploration risk taking. Additional tests indicate that ESO risk incentives exhibit a negative relation with oil price hedging in a system of equations where ESO risk incentives and hedging are allowed to be endogenously determined. Overall, our results are consistent with ESOs providing managers with incentives to mitigate risk-related incentive problems.

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“…(Shillinglaw 1959, page 46) Notwithstanding this warning, recent theoretical work concludes that accounting return measures provide not only information about how well resources are used, but also incentives that encourage optimal resource use (Reichelstein 1997;Rogerson 1997;Dutta and Reichelstein 1999;Zimmerman 2001). Even if managers have little authority over investment decisions, theory suggests that accounting return measures are informative (Holmstrom 1979;Indjejikian 1999) about the way in which managers wield their authority. Note that while the 2 The normative literature traditionally invokes the "controllability principle" to argue that managers should only be charged for the resources over which they have control.…”

Section: Authority Of Business Unit Managersmentioning

confidence: 99%

“…Note that while the 2 The normative literature traditionally invokes the "controllability principle" to argue that managers should only be charged for the resources over which they have control. The controllability principle has been somewhat discredited in more recent theoretical (Indjejikian 1999) and empirical (Merchant 1989) work. managers in our sample do not typically have full investment authority, 3 they substantially affect the use of current resources.…”

Section: Authority Of Business Unit Managersmentioning

confidence: 99%

“…Agency models suggest that the relative importance of a performance measure depends on the "signal" provided by the measure about an employee's action and the "noise" with which the actions are captured (Lambert and Larcker 1987;Banker and Datar 1989;Indjejikian 1999). Several authors have noted the lack of causal relation between aggregated financial measures and the actions of managers with low authority, and advocate the use of disaggregated and non-financial measures as being more directly under these managers' control (Wruck and Jensen 1994;Ittner and Larcker 1998b;.…”

Section: H1mentioning

confidence: 99%

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Assessing the Performance of Business Unit Managers

Lent

Bouwens²

2006

SSRN Journal

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Using a sample of 140 managers, we investigate the use of various performance metrics in determining the periodic assessment, bonus decisions, and career paths of business unit managers. We show that the weight on accounting return measures is associated with the authority of these managers, and we document that both disaggregated measures (expenses and revenues), and non-financial measures play a greater role as interdependencies between business units increase. The results suggest separate and distinct roles for different types of performance measures. Accounting return measures are used to create the proper incentives for managers with greater authority, while disaggregated and non-financial measures are employed in response to interdependencies. JEL classification: M41

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Performance Evaluation and Compensation Research: An Agency Perspective

Cited by 167 publications

References 48 publications

Financial Accounting Information and Corporate Governance

Financial Accounting Information and Corporate Governance

Empirical Evidence on the Relation Between Stock Option Compensation and Risk Taking

Assessing the Performance of Business Unit Managers

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