National differences in incentive compensation practices: The differing roles of financial performance measurement in the United States and the Netherlands
AbstractThis paper describes the findings of a study aimed at providing an international replication of a US-based study by Gibbs et al. [Gibbs, M., Merchant, K., Van der Stede, W., & Vargus, M. (2004). Determinants and effects of subjectivity in incentives. The Accounting Review, 79(2), 409-436; Gibbs, M., Merchant, K., Van der Stede, W., & Vargus, M. (2006). The structure of incentive contracts: Evidence from auto dealerships. Working Paper, University of Chicago, University of Southern California, London School of Economics and University of Texas-Dallas] focused on the incentive compensation practices of firms in the automobile retailing industry. The purpose was to determine the extent to which these practices and their effects were similar across countries. Theory provides conflicting predictions as to whether international practices should reflect a situational "best fit" or "global best practices." We collected a dataset comparable to that of Gibbs et al. from Dutch automobile retailers. The findings reveal dramatic differences in practices across the two countries. As compared to the US firms, the Dutch firms are much less likely to provide their managers with incentive compensation in any form. Where Dutch firms do offer incentive compensation, the payouts are smaller and their bonus awards are less likely to be based on profit measures of performance. But where the Dutch firms use incentive compensation, their performance/reward functions are more complex. Moreover, unlike in the US firms, in the Dutch firms the effects of the use of incentive compensation on net profit and pay satisfaction are negative.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Elsevier in its journal Accounting, Organizations and Society.
Volume (Year): 34 (2009)
Issue (Month): 1 (January)
Contact details of provider:
Web page: http://www.elsevier.com/locate/aos
accounting; organizations; society;
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Ingmar Bj�rkman & Carl F Fey & Hyeon Jeong Park, 2007. "Institutional theory and MNC subsidiary HRM practices: evidence from a three-country study," Journal of International Business Studies, Palgrave Macmillan, Palgrave Macmillan, vol. 38(3), pages 430-446, May.
- Birnberg, Jacob G. & Snodgrass, Coral, 1988. "Culture and control: A field study," Accounting, Organizations and Society, Elsevier, Elsevier, vol. 13(5), pages 447-464, August.
- Merchant, Kenneth A. & Chow, Chee W. & Wu, Anne, 1995. "Measurement, evaluation and reward of profit center managers: A cross-cultural field study," Accounting, Organizations and Society, Elsevier, Elsevier, vol. 20(7-8), pages 619-638.
- Baker, George P & Jensen, Michael C & Murphy, Kevin J, 1988.
" Compensation and Incentives: Practice vs. Theory,"
Journal of Finance, American Finance Association,
American Finance Association, vol. 43(3), pages 593-616, July.
- Baker, G.P. & Jensen, M.C. & Murphy, K.J., 1988. "Compensation And Incentives: Practice Vs. Theory," Papers, Rochester, Business - Managerial Economics Research Center 88-05, Rochester, Business - Managerial Economics Research Center.
- Harrison, Graeme L., 1993. "Reliance on accounting performance measures in superior evaluative style -- The influence of national culture and personality," Accounting, Organizations and Society, Elsevier, Elsevier, vol. 18(4), pages 319-339, May.
- Philip M. Rosenzweig, 1994. "When Can Management Science Research Be Generalized Internationally?," Management Science, INFORMS, INFORMS, vol. 40(1), pages 28-39, January.
- Baskerville, Rachel F., 2003. "Hofstede never studied culture," Accounting, Organizations and Society, Elsevier, Elsevier, vol. 28(1), pages 1-14, January.
- Jensen, Michael C & Murphy, Kevin J, 1990.
"Performance Pay and Top-Management Incentives,"
Journal of Political Economy, University of Chicago Press,
University of Chicago Press, vol. 98(2), pages 225-64, April.
- Jensen, M.C. & Murphy, K.J., 1988. "Performance Pay And Top Management Incentives," Papers, Rochester, Business - Managerial Economics Research Center 88-04, Rochester, Business - Managerial Economics Research Center.
- Alistair Bruce & Trevor Buck & Brian G. M. Main, 2005. "Top Executive Remuneration: A View from Europe," Journal of Management Studies, Wiley Blackwell, Wiley Blackwell, vol. 42(7), pages 1493-1506, November.
- Karen L Newman & Stanley D Nollen, 1996. "Culture and Congruence: The Fit Between Management Practices and national Culture," Journal of International Business Studies, Palgrave Macmillan, Palgrave Macmillan, vol. 27(4), pages 753-779, December.
- Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, Elsevier, vol. 3(4), pages 305-360, October.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.