Browsing by Subject "Managerial accounting"

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Are self-evaluations helpful or harmful when employees are unaware of their marginal contribution to firm welfare?
(2010-08) Reichert, Bernhard Erich; Kachelmeier, Steven J. (Steven John), 1958-; Williamson, Michael G.; Anderson, Urton L.; Dukerich, Janet M.; Koonce, Lisa L.
This study examines whether eliciting self-evaluations increases or decreases the propensity of a productive agent to retaliate against an employer for paying compensation that the agent perceives to be too low for the work performed. Specifically, I consider a setting in which a principal knows more about the agent’s production than even the agent can observe. In such a setting, an agent might perceive that s/he is being underpaid if the principal pays less than the agent believes s/he deserves, especially if the agent is overconfident about his/her own productive ability. Such an agent could take retaliatory actions against the principal that would be costly to both parties. Self-evaluations could mitigate such tendencies if they result in compensation that is more aligned with agent self-perceptions. Alternatively, self-evaluations could worsen such tendencies if they reinforce the perceived inequity of compensation that does not match agent self-perceptions. I present experimental evidence from comparing a control condition without self-evaluations to three different forms of self-evaluation reports, finding evidence consistent with the premise that self-evaluations increase retaliatory actions and lower welfare. My findings show a cost to self-evaluations that thus far has not been sufficiently considered in the literature.
Control in a teamwork environment: the impact of social ties on the effectiveness of mutual monitoring contracts
(2002) Towry, Kristy Lynne; Kachelmeier, Steven J. (Steven John), 1958-
This study examines control in a teamwork setting, experimentally investigating two financial incentive systems that have been proposed in the agency theory-based analytic literature. Both systems rely on mutual monitoring, the ability of team members to observe each other’s actions. However, the systems differ on whether team members report observations of their peers' efforts to management (vertical incentive system) or directly control the actions of each other (horizontal incentive system). Findings suggest that the effectiveness of these systems depends on the level of team identity. Specifically, the effectiveness of a vertical incentive system is degraded by a strong team identity. On the other hand, a horizontal incentive system becomes more effective in the presence of a strong team identity.