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Author: | Feltham, G. Indjejikian, R. Nanda, D. |
Title: | Dynamic incentives and dual-purpose accounting |
Journal: | Journal of Accounting & Economics
2006 : DEC, VOL. 42:3, p. 417-437 |
Index terms: | accounting incentives employees agency theory models |
Language: | eng |
Abstract: | Ongoing employment relationships often give rise to implicit (here as: impl.), dynamic incentives (as: incs.). This paper describes the implications of impl. incs. when firms use information about both an employee's past performance (as: perf.) and his future productivity (as: prod.) in a 2-period agency model. It is shown that when an accounting system (as: acc-syst.) serves these dual objectives, an employee's impl. incs. may be beneficial or detrimental to the firm. As a consequence, firms may prefer an acc-syst. reporting a single metric combining information about past perf. and future prod., over one that reports two distinct metrics. |
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