The retention effect of withholding performance information

• 成果类型: Article
• 署名作者: Ray, Korok
• 署名单位: University of Chicago
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/accr.2007.82.2.389
• 发表日期: 2007
• 页码: 389-425
• 关键词: disclosure; news

摘要

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.