Document Type

Journal Article

Department/Unit

Department of Accountancy and Law

Title

Observability and subjective performance measurement

Language

English

Abstract

© 2015 Accounting Foundation, The University of Sydney. Accounting research provides theory and evidence on the choice and use of subjective performance measures for evaluating managerial performance. However, accounting research does not focus on the subjective performance measurement of managerial behaviour once measures have been chosen. We extend accounting research by investigating the factors that influence the subjective performance measurement decision. We predict that the level of subjective performance measurement is influenced by the informativeness of financial performance measures and by the verifiability of the nonfinancial measures in a formula-based incentive plan. We expect that the measures' informativeness and verifiability depends on the observability of both the managerial behaviour being subjectively measured and the reliability of the financial and nonfinancial performance measures. More specifically, we hypothesize that the influence of the levels of the financial performance measures on the level of subjective performance measurement is moderated by the observability of either the managerial behaviour being measured (for the financial measures) or the performance measures' reliability (for the nonfinancial measures). Data from a firm provide support for our hypotheses.

Keywords

Nonfinancial performance measures, Observability, Performance measurement, Performance measures, Subjective performance measurement

Publication Date

2015

Source Publication Title

Abacus

Volume

51

Issue

2

Start Page

208

End Page

237

Publisher

Wiley

DOI

10.1111/abac.12050

Link to Publisher's Edition

http://dx.doi.org/10.1111/abac.12050

ISSN (print)

00013072

ISSN (electronic)

14676281

This document is currently not available here.

Share

COinS