Shaping Incentives through Measurement and Contracts

• 成果类型: Article
• 署名作者: Bonham, Jonathan D.
• 署名单位: University of Illinois System; University of Illinois Chicago; University of Illinois Chicago Hospital
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/TAR-2019-0248
• 发表日期: 2024
• 页码: 57-81
• 关键词: ACCOUNTING CONSERVATISM; earnings management; moral hazard; aggregation

摘要

I study productive activity, measurement, and compensation in a principal agent model that relaxes common restrictions on the action set of the agent, the distribution of performance measures, and the shape of the wage schedule. The solution to this relaxed problem unifies insights from extant theory and shares features with well-known empirical phenomena. In particular, the optimal outcome distribution has a kink, optimal measurement is conservative, and optimal wages ensure congruent incentives and resemble accounting -based bonus plans featuring a floor, hurdle bonus, incentive zone, and ceiling, with thresholds that may reference other performance measures. Beyond these specific insights, the paper provides a flexible framework for studying how incentives are shaped through measurement and contracts.