Determinants of divisional performance evaluation practices

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190 citations0/0 files storedJournal of Accounting and Economics

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Accounting and Organizational Management Corporate Finance and Governance Auditing, Earnings Management, Governance

Abstract

I investigate factors affecting firms' uses of three types of performance metrics to evaluate division mangers: division accounting metrics, firm accounting metrics and firm stock price. Survey data reveal that division accounting metric use increases with the divisions' industry's price–earnings correlation and decreases with divisional growth opportunities; firm accounting metric use increases with the manager's impact on other divisions and decreases with growth opportunities and other managers' impact on that division; and firm stock price use increases with relative division size and the correlation between firm stock returns and market-wide returns.

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References

1977Determinants of corporate borrowing 1992The balanced scorecard : measures that drive performance 1979Moral Hazard and Observability 1992The balanced scorecard--measures that drive performance.1992The investment opportunity set and corporate financing, dividend, and compensation policies 1998Putting the Balanced Scorecard to Work 1975Estimation of a Model with Multiple Indicators and Multiple Causes of a Single Latent Variable 1993Additional evidence on the association between the investment opportunity set and corporate financing, dividend, and compensation policies

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