Investment Incentives from Goal-Incongruent Performance Measures: Experimental Evidence

Arnold, Markus C.; Gillenkirch, Robert M.; Welker, Susanne A. (2006). Investment Incentives from Goal-Incongruent Performance Measures: Experimental Evidence. In: Operations Research Proceedings 2006. Operations Research Proceedings: Vol. 2006 (pp. 381-386). Berlin: Springer 10.1007/978-3-540-69995-8_62

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We analyze investment incentives of goal incongruent performance measures in an experiment in which ‘managers’ make one-period investment decisions and ‘owners’ predict these decisions. Three alternative performance measures are considered: earnings, ROI, and residual income. These measures serve as archetypes for a wide variety of measures used in practice. Standard theoretical predictions with respect to the investment incentives of earnings, ROI, and residual income are well documented, and they have become part of the management accounting education (e.g., [5]). They illustrate one of the basic principles of management accounting: ‘you get what you pay for’. As is well known, neither earnings nor ROI is a goal congruent performance measure, whereas residual income is goal congruent due to its conservation property.

Item Type:

Book Section (Book Chapter)

Division/Institute:

03 Faculty of Business, Economics and Social Sciences > Department of Business Management > Institute for Accounting and Controlling > Managerial Accounting

UniBE Contributor:

Arnold, Markus Christopher

Subjects:

300 Social sciences, sociology & anthropology > 330 Economics

ISSN:

0721-5924

ISBN:

978-3-540-69994-1

Series:

Operations Research Proceedings

Publisher:

Springer

Language:

English

Submitter:

Lynn Carole Selhofer

Date Deposited:

11 Mar 2020 15:35

Last Modified:

11 Mar 2020 15:35

Publisher DOI:

10.1007/978-3-540-69995-8_62

URI:

https://boris.unibe.ch/id/eprint/141336

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