I develop an agency model in which performance measurement and compensation contracts are jointly used to shape incentives. When an agent has extensive control over firm value, there tend to be many optimal measures — each implying a unique optimal contract with a strikingly simple closed form — that efficiently motivate the same productive action. Because incentives can be embedded in the measure or the contract, any distortions in one are offset by adjusting the other, which can lead to highly nonlinear contracts. When the agent is risk neutral and has unlimited liability, there exist optimal measures that induce linear, convex, concave, bang-bang, piece-wise linear, S-shaped, or standard bonus contracts with floors, ceilings, and hurdles. When the agent has limited liability, standard bonus contracts written on understated measures tend to be jointly optimal. When the agent is risk averse, perfect measures are uniquely optimal whereas imperfect measures tend to distort firm value.
{"title":"Shaping Incentives through Measurement and Contracts","authors":"J. Bonham","doi":"10.2139/ssrn.3691705","DOIUrl":"https://doi.org/10.2139/ssrn.3691705","url":null,"abstract":"I develop an agency model in which performance measurement and compensation contracts are jointly used to shape incentives. When an agent has extensive control over firm value, there tend to be many optimal measures — each implying a unique optimal contract with a strikingly simple closed form — that efficiently motivate the same productive action. Because incentives can be embedded in the measure or the contract, any distortions in one are offset by adjusting the other, which can lead to highly nonlinear contracts. When the agent is risk neutral and has unlimited liability, there exist optimal measures that induce linear, convex, concave, bang-bang, piece-wise linear, S-shaped, or standard bonus contracts with floors, ceilings, and hurdles. When the agent has limited liability, standard bonus contracts written on understated measures tend to be jointly optimal. When the agent is risk averse, perfect measures are uniquely optimal whereas imperfect measures tend to distort firm value.","PeriodicalId":379982,"journal":{"name":"Chicago Booth ARC: Managerial Accounting (Topic)","volume":"7 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-09-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130604572","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Financial reports must provide the following: needed information for assessing the financial position and economical stamina of the institution, the performance and profitability, the quality of funding and consuming cash, and for assessing the quality of executing stewardship and legal duties. It also provides supplementary information for better understanding of the presented financial data and predicting the future situation. So, in the present study, the impact of Extensible Business Reporting Language on promoting the quality of financial reporting of the accepted corporations in Tehran securities exchange is investigated. The data collected, through questionnaires, from managers, accountants and auditors for demographic variables and also all the hypotheses were analyzed using statistical deductive and descriptive methods. The findings indicate that there is a direct and significant relationship between familiarity with Extensible Business Reporting Language (XBRL), on the one hand, and the quality improvement of financial reporting, clarifying the financial transparency, funding corporations and the efficiency of executive accounting processes.
{"title":"Investigating the Effect of Extensible Business Reporting Language (XBRL) on Quality Improvement of Financial Reporting in Iranian Corporations","authors":"Shaho Heidari Gandoman, M. Rostami","doi":"10.2139/ssrn.3061847","DOIUrl":"https://doi.org/10.2139/ssrn.3061847","url":null,"abstract":"Financial reports must provide the following: needed information for assessing the financial position and economical stamina of the institution, the performance and profitability, the quality of funding and consuming cash, and for assessing the quality of executing stewardship and legal duties. It also provides supplementary information for better understanding of the presented financial data and predicting the future situation. So, in the present study, the impact of Extensible Business Reporting Language on promoting the quality of financial reporting of the accepted corporations in Tehran securities exchange is investigated. The data collected, through questionnaires, from managers, accountants and auditors for demographic variables and also all the hypotheses were analyzed using statistical deductive and descriptive methods. The findings indicate that there is a direct and significant relationship between familiarity with Extensible Business Reporting Language (XBRL), on the one hand, and the quality improvement of financial reporting, clarifying the financial transparency, funding corporations and the efficiency of executive accounting processes.","PeriodicalId":379982,"journal":{"name":"Chicago Booth ARC: Managerial Accounting (Topic)","volume":"42 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2017-10-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"132034253","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper aims at making financial analysis of a sugar entity in terms of liquidity, solvency, operational efficiency and profitability. Management practices with professional approach tend to improve the financial performance of sugar factories by implementing some innovative practices to reduce the controllable cost and generating additional revenues.
{"title":"Analysis of Financial Statements in the Sugar Industry","authors":"Dilip Patil, J.N. Mohanthy","doi":"10.2139/SSRN.2962855","DOIUrl":"https://doi.org/10.2139/SSRN.2962855","url":null,"abstract":"This paper aims at making financial analysis of a sugar entity in terms of liquidity, solvency, operational efficiency and profitability. Management practices with professional approach tend to improve the financial performance of sugar factories by implementing some innovative practices to reduce the controllable cost and generating additional revenues.","PeriodicalId":379982,"journal":{"name":"Chicago Booth ARC: Managerial Accounting (Topic)","volume":"7 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2017-05-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116952877","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
I use the staggered state-level adoption of the 150-hour Rule (the Rule) as a natural experiment along with the career histories of professional accountants’ from LinkedIn to examine the effects of mandatory occupational licensure on the individual quality of Certified Public Accountants (CPAs). Using a difference-in-difference and synthetic control research design, I document that the Rule marginally increases CPA exam pass rates and reduced the candidate supply, leading to an overall decline in the number of successful candidates. My analysis of LinkedIn data shows that individuals subject to the Rule are more likely to be employed at a Big 4 public accounting firm and specialize in taxation. However, Rule individuals have the same likelihood of promotion, the same duration until promotion, and exit public accounting at faster rates than their non-Rule counterparts. These findings suggest that restrictive licensing laws reduced the supply of new CPAs while failing to effectively increase the quality of CPAs as measured by their labor market outcomes.
{"title":"Occupational Licensing and Accountant Quality: Evidence from the 150-Hour Rule","authors":"John M. Barrios","doi":"10.2139/ssrn.2893909","DOIUrl":"https://doi.org/10.2139/ssrn.2893909","url":null,"abstract":"I use the staggered state-level adoption of the 150-hour Rule (the Rule) as a natural experiment along with the career histories of professional accountants’ from LinkedIn to examine the effects of mandatory occupational licensure on the individual quality of Certified Public Accountants (CPAs). Using a difference-in-difference and synthetic control research design, I document that the Rule marginally increases CPA exam pass rates and reduced the candidate supply, leading to an overall decline in the number of successful candidates. My analysis of LinkedIn data shows that individuals subject to the Rule are more likely to be employed at a Big 4 public accounting firm and specialize in taxation. However, Rule individuals have the same likelihood of promotion, the same duration until promotion, and exit public accounting at faster rates than their non-Rule counterparts. These findings suggest that restrictive licensing laws reduced the supply of new CPAs while failing to effectively increase the quality of CPAs as measured by their labor market outcomes.","PeriodicalId":379982,"journal":{"name":"Chicago Booth ARC: Managerial Accounting (Topic)","volume":"34 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2017-01-06","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"129403681","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper examines the illusion of value generated by the booking of accounting goodwill and its impact as a driver of top line and bottom line growth in an otherwise satiated market.“Packaging is everything” is the popular phrase. “It holds truth regarding the illusion of value.” (The Illusion of Value, January 12, 2015)
{"title":"Goodwill: The Illusion of Value?","authors":"J. Nugent","doi":"10.2139/SSRN.2844775","DOIUrl":"https://doi.org/10.2139/SSRN.2844775","url":null,"abstract":"This paper examines the illusion of value generated by the booking of accounting goodwill and its impact as a driver of top line and bottom line growth in an otherwise satiated market.“Packaging is everything” is the popular phrase. “It holds truth regarding the illusion of value.” (The Illusion of Value, January 12, 2015)","PeriodicalId":379982,"journal":{"name":"Chicago Booth ARC: Managerial Accounting (Topic)","volume":"20 2","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2016-09-28","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"132462117","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The environment in which an organization operates namely, new entrants, substitute products, abundance of competitors with diverse strategies, lack of differentiation, origins and personalities (Porter, 1979), dictates how the company should plan its internal business processes as well as its learning and growth development to satisfy customers and thus achieve enterprise performance. For this study, we collected data until February 2009 by surveying American and Canadian companies using the Dunn and Bradstreet database. We used OLS regression to test hypothesized relation between the variables. We find that there is a positive relationship between Learning & growth (LG) and Technological dynamism (TD); and LG and Environmental competitiveness (EC); but a weak positive relationship between LG and Internal business process (IBP). These results support our argument that firms that confront external environment need to invest in IBP in order to succeed. We found that LG has a strong positive relationship with EC but not significant relationship with TD. While LG has a strong positive influence on Customer satisfaction (CS), IBP shows a very weak positive relationship but Financial Performance (FP) has a strong positive relationship with EC, IBP, and CS, but a relatively weak positive relationship with TD and LG. This means that a competitive environment with fast moving technology influences firms to invest in internal processes and human resources which in turn creates customer satisfaction thus have better operating results. Before the results could be generalized, more research is warranted.
组织运作的环境，即新进入者，替代产品，竞争对手的丰富与不同的战略，缺乏差异化，起源和个性(波特，1979)，决定了公司应该如何规划其内部业务流程以及学习和成长发展，以满足客户，从而实现企业绩效。在这项研究中，我们使用Dunn and Bradstreet数据库调查了美国和加拿大的公司，收集了截至2009年2月的数据。我们使用OLS回归来检验变量之间的假设关系。研究发现，学习与成长(LG)与技术动态(TD)之间存在正相关关系;LG和环境竞争力(EC);但LG与内部业务流程(IBP)之间存在微弱的正相关关系。这些结果支持了我们的观点，即面对外部环境的公司需要投资于IBP以获得成功。我们发现LG与EC有很强的正相关关系，而与TD的关系不显著。虽然LG对客户满意度(CS)有很强的正向影响，但IBP表现出非常弱的正向关系，但财务绩效(FP)与EC、IBP和CS有很强的正向关系，但与TD和LG的正向关系相对较弱。这意味着竞争环境与快速发展的技术影响企业投资于内部流程和人力资源，这反过来又创造了客户满意度，从而有更好的经营成果。在结果可以推广之前，需要进行更多的研究。
{"title":"How Do Competition and Capabilities Influence Managerial Performance?","authors":"Majidul Islam, A. Hossain","doi":"10.2139/ssrn.2712896","DOIUrl":"https://doi.org/10.2139/ssrn.2712896","url":null,"abstract":"The environment in which an organization operates namely, new entrants, substitute products, abundance of competitors with diverse strategies, lack of differentiation, origins and personalities (Porter, 1979), dictates how the company should plan its internal business processes as well as its learning and growth development to satisfy customers and thus achieve enterprise performance. For this study, we collected data until February 2009 by surveying American and Canadian companies using the Dunn and Bradstreet database. We used OLS regression to test hypothesized relation between the variables. We find that there is a positive relationship between Learning & growth (LG) and Technological dynamism (TD); and LG and Environmental competitiveness (EC); but a weak positive relationship between LG and Internal business process (IBP). These results support our argument that firms that confront external environment need to invest in IBP in order to succeed. We found that LG has a strong positive relationship with EC but not significant relationship with TD. While LG has a strong positive influence on Customer satisfaction (CS), IBP shows a very weak positive relationship but Financial Performance (FP) has a strong positive relationship with EC, IBP, and CS, but a relatively weak positive relationship with TD and LG. This means that a competitive environment with fast moving technology influences firms to invest in internal processes and human resources which in turn creates customer satisfaction thus have better operating results. Before the results could be generalized, more research is warranted.","PeriodicalId":379982,"journal":{"name":"Chicago Booth ARC: Managerial Accounting (Topic)","volume":"38 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2016-01-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131643662","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The claim of performance management systems is to enhance managers’ knowledge about the events, circumstances and processes, which constitute organisational performance. Performance management systems serve as instruments to reconstruct the complexity of the value creation process. Thereby, modern companies, especially service companies, are confronted with a highly dynamic environment. Against this background, a performance management system is conceptualized as continuous process of redesigning performance management systems. Against this background, the suitability of the Balanced Scorecard for causal-oriented performance management is discussed. On this basis, the benefits of integrating a time dimension into BSC-methodology are evaluated from a design-theoretical point of view. Based on the developed design-framework and deficiencies of the standard Balanced Scorecard-methodology, a dynamic BSC is modelled. The aim of this model is to support managers understanding of the complex causal system, which constitutes the value creation process. Concerning the needs of causal performance management, the opportunities and limitations of dynamic models are discussed.
{"title":"Supporting Causal-Oriented Performance Management by a Dynamized Balanced Scorecard","authors":"W. Ossadnik, F. Rosenkranz, J. Steins","doi":"10.2139/ssrn.2208528","DOIUrl":"https://doi.org/10.2139/ssrn.2208528","url":null,"abstract":"The claim of performance management systems is to enhance managers’ knowledge about the events, circumstances and processes, which constitute organisational performance. Performance management systems serve as instruments to reconstruct the complexity of the value creation process. Thereby, modern companies, especially service companies, are confronted with a highly dynamic environment. Against this background, a performance management system is conceptualized as continuous process of redesigning performance management systems. Against this background, the suitability of the Balanced Scorecard for causal-oriented performance management is discussed. On this basis, the benefits of integrating a time dimension into BSC-methodology are evaluated from a design-theoretical point of view. Based on the developed design-framework and deficiencies of the standard Balanced Scorecard-methodology, a dynamic BSC is modelled. The aim of this model is to support managers understanding of the complex causal system, which constitutes the value creation process. Concerning the needs of causal performance management, the opportunities and limitations of dynamic models are discussed.","PeriodicalId":379982,"journal":{"name":"Chicago Booth ARC: Managerial Accounting (Topic)","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2013-01-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126431083","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Accounting has changed radically in China over the last 30 years, a transformation which is associated with one of the most astonishing episodes of economic development witnessed in modern times. Most researchers of accounting in China focus their attention on contemporary business accounting or identify challenges for the future. This article takes a different perspective. First, it investigates accounting changes in the Chinese public sector. It explores how public sector accounting has been involved in the process of modernizing the state bureaucracy. Second, the article takes a historical viewpoint and attempts to understand the changes in public sector accounting regulation which have taken place in recent decades. We identify various streams of regulation and waves of policy outputs over time. Four main phases of continuity and change are also located, providing a framework in which future researchers may analyze accounting developments in the post-Open Door period. We define these phases as: restoration, revision, innovation and maintenance.
{"title":"Opening the Door to Accounting Change: Transformations in Chinese Public Sector Accounting","authors":"Qingmei Xue, Luca Zan","doi":"10.2139/ssrn.2133311","DOIUrl":"https://doi.org/10.2139/ssrn.2133311","url":null,"abstract":"Accounting has changed radically in China over the last 30 years, a transformation which is associated with one of the most astonishing episodes of economic development witnessed in modern times. Most researchers of accounting in China focus their attention on contemporary business accounting or identify challenges for the future. This article takes a different perspective. First, it investigates accounting changes in the Chinese public sector. It explores how public sector accounting has been involved in the process of modernizing the state bureaucracy. Second, the article takes a historical viewpoint and attempts to understand the changes in public sector accounting regulation which have taken place in recent decades. We identify various streams of regulation and waves of policy outputs over time. Four main phases of continuity and change are also located, providing a framework in which future researchers may analyze accounting developments in the post-Open Door period. We define these phases as: restoration, revision, innovation and maintenance.","PeriodicalId":379982,"journal":{"name":"Chicago Booth ARC: Managerial Accounting (Topic)","volume":"35 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2012-08-21","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128375936","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2007-03-01DOI: 10.2308/ACCR.2007.82.2.389
Korok Ray
It is a common practice for firms to conduct performance evaluations of their employees and yet to withhold this information from those employees. This paper argues that firms strategically withhold performance information to retain workers. In particular, if the worker enjoys high outside options and is tempted to quit, then the firm chooses not to reveal his performance information in order to keep him on the job. The firm's equilibrium strategy is to fire if performance is sufficiently low, reveal information if performance is sufficiently high, and withhold information otherwise. The pooling equilibrium is robust under a wide variety of settings, such as general cost functions, ability‐contingent outside options, nonlinear contracts, nonverifiable output, and multiple stages of production.
{"title":"The Retention Effect of Withholding Performance Information","authors":"Korok Ray","doi":"10.2308/ACCR.2007.82.2.389","DOIUrl":"https://doi.org/10.2308/ACCR.2007.82.2.389","url":null,"abstract":"It is a common practice for firms to conduct performance evaluations of their employees and yet to withhold this information from those employees. This paper argues that firms strategically withhold performance information to retain workers. In particular, if the worker enjoys high outside options and is tempted to quit, then the firm chooses not to reveal his performance information in order to keep him on the job. The firm's equilibrium strategy is to fire if performance is sufficiently low, reveal information if performance is sufficiently high, and withhold information otherwise. The pooling equilibrium is robust under a wide variety of settings, such as general cost functions, ability‐contingent outside options, nonlinear contracts, nonverifiable output, and multiple stages of production.","PeriodicalId":379982,"journal":{"name":"Chicago Booth ARC: Managerial Accounting (Topic)","volume":"383 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2007-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122352955","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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