To tell or not to tell: the incentive effects of disclosing employer assessments

• 成果类型: Article
• 署名作者: Lilge, Alexandra; Ramchandani, Abhishek
• 署名单位: Leibniz University Hannover; University of Texas System; University of Texas Austin; University of Hawaii System; University of Hawaii Manoa
• 刊物名称: REVIEW OF ACCOUNTING STUDIES
• ISSN/ISSBN: 1380-6653
• DOI: 10.1007/s11142-023-09769-6
• 发表日期: 2024
• 页码: 2832-2870
• 关键词: pre-decision information; career concerns; performance feedback; informed principal; tournaments; CONTRACTS

摘要

Should employers disclose their assessments of their employees? Popular managerial advice suggests that telling employees that they are assessed to have high potential leads to greater effort and engagement, boosting firm profits. However, some employers still choose to withhold employee assessments. What explains this paradoxical observation? We show that disclosing a positive assessment to an employee increases his incentive to appear successful. Success can be achieved by working hard or by misreporting. If the internal controls are sufficiently weak, the employee excessively substitutes misreporting for effort, thereby decreasing firm profits. Consequently, our model predicts that employers withhold assessments when internal controls are weak. Other predictions are that, all else equal, employers with an experienced human resources (HR) function will be more likely to disclose assessments, and employers who hire from prestigious target schools will be less likely to disclose assessments.