Balanced Scorecards: A Relational Contract Approach

• 成果类型: Article
• 署名作者: Kvaloy, Ola; Olsen, Trond E. E.
• 署名单位: Universitetet i Stavanger; Norwegian School of Economics (NHH)
• 刊物名称: JOURNAL OF ACCOUNTING RESEARCH
• ISSN/ISSBN: 0021-8456
• DOI: 10.1111/1475-679X.12465
• 发表日期: 2023
• 页码: 619-652
• 关键词: performance-measure congruity; incentive contracts; moral hazard; job design; management; SUBJECTIVITY; multitasking; signals

摘要

Reward systems based on balanced scorecards often connect pay to an index, that is, a weighted sum of multiple performance measures. We show that such an index contract may indeed be optimal if performance measures are nonverifiable so that the contracting parties must rely on self-enforcement. Under commonly invoked assumptions (including normally distributed measurements), we show that the weights in the index reflect a tradeoff between distortion and precision for the measures. The efficiency of the contract improves with higher precision of the index measure, because this strengthens incentives, and correlations between measurements may for this reason be beneficial. There is a caveat, however, because the index contract is not necessarily optimal for very precise measurements, although it is shown to be asymptotically optimal. We also consider hybrid measurements, and show that the principal may want to include verifiable performance measures in the relational index contract in order to improve incentives, and that this has noteworthy implications for the formal contract.