Performance standards in incentive contracts

• 成果类型: Article
• 署名作者: Murphy, KJ
• 署名单位: University of Southern California
• 刊物名称: JOURNAL OF ACCOUNTING & ECONOMICS
• ISSN/ISSBN: 0165-4101
• DOI: 10.1016/S0165-4101(01)00013-1
• 发表日期: 2000
• 关键词: bonus schemes; moral hazard; COMPENSATION; aggregation

摘要

Research in incentives has focused on performance measures and pay-performance sensitivities but has largely ignored the performance standard, which generates important incentives whenever plan participants can influence the standard-setting process. Internally determined standards are directly affected by management actions in the current or prior year, while externally determined standards are less easily affected. I show that companies choose external standards when prior performance is a noisy estimate of contemporaneous performance. In addition, companies using budget based and other internally determined performance standards have less-variable bonus payouts, and are more likely to smooth earnings, than companies using externally determined standards. (C) 2001 Elsevier Science B.V. All rights reserved.