EC 4

Question 1

Performance Measures – Moers (2006)

Answer 1

▪ The association between the relative incentive use of financial performance measures and delegation of decision rights is positively affected by the relative quality of the financial performance measures
▪ The extent to which firms delegate decision rights to business unit managers is (at least partially) determined by the quality of the financial performance measures

Question 2

Performance Measures – Campbell (2008)

Answer 2

• Promotions have an incentive effect leading to improvements on non-financial performance measures and those improvements are caused by both effort and learning
• Performance on nonfinancial performance measures is incorporated in promotion decisions, implying that nonfinancial performance measures play a role in improving the matching effect of promotions.

Question 3

Performance Measures-Abernethy et al. (2013)

Answer 3

• Main results
• Use of accounting return measures and nonfinancial measures induces managers to also put effort in actions with long(er) term impact
• The effect of ARM on reducing managerial myopia is stronger
• ARM: more attention for both medium and long-run
• NFPM: more attention for medium run