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Assessing the Performance of Business Unit Managers

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  • JAN BOUWENS
  • LAURENCE VAN LENT

Abstract

ABSTRACT Using a sample of 140 managers, we investigate the use of various performance metrics in determining the periodic assessment, bonus decisions, and career paths of business unit managers. We show that the weight on accounting return measures is associated with the authority of these managers, and we document that both disaggregated measures (expenses and revenues), and nonfinancial measures play a greater role as interdependencies between business units increase. The results suggest separate and distinct roles for different types of performance measures. Accounting return measures are used to create the proper incentives for managers with greater authority, while disaggregated and nonfinancial measures are employed in response to interdependencies. Copyright University of Chicago on behalf of the Institute of Professional Accounting, 2007.

Suggested Citation

  • Jan Bouwens & Laurence Van Lent, 2007. "Assessing the Performance of Business Unit Managers," Journal of Accounting Research, Wiley Blackwell, vol. 45(4), pages 667-697, September.
  • Handle: RePEc:bla:joares:v:45:y:2007:i:4:p:667-697
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    References listed on IDEAS

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    Cited by:

    1. Sebastian Goebel & Barbara Weißenberger, 2016. "The Dark Side of Tight Financial Control: Causes and Remedies of Dysfunctional Employee Behaviors," Schmalenbach Business Review, Springer;Schmalenbach-Gesellschaft, vol. 17(1), pages 69-101, April.
    2. Daron Acemoglu & Philippe Aghion & Claire Lelarge & John Van Reenen & Fabrizio Zilibotti, 2007. "Technology, Information, and the Decentralization of the Firm," The Quarterly Journal of Economics, Oxford University Press, vol. 122(4), pages 1759-1799.
    3. Kai Henning Blume, 2016. "Value-based management as a tailor-made management practice? A literature review," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 20(3), pages 553-590, September.
    4. Predrag Stančić & Miroslav Todorović & Milan Čupić, 2012. "Value-Based Management And Corporate Governance: A Study Of Serbian Corporations," Economic Annals, Faculty of Economics, University of Belgrade, vol. 57(193), pages 93-112, April- Ju.
    5. Ariela Caglio & Angelo Ditillo, 2012. "Interdependence and accounting information exchanges in inter-firm relationships," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 16(1), pages 57-80, February.
    6. Noeverman, J., 2010. "Not Just Because it is Fair - The Role of Feedback Quality and Voice in Performance Evaluation," ERIM Report Series Research in Management ERS-2010-048-ORG, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    7. van Lent, L.A.G.M., 2007. "Endogeneity in management accounting research : A comment," Other publications TiSEM 8bcd5bc8-5fdd-4aa4-9b3f-8, Tilburg University, School of Economics and Management.
    8. repec:spr:jlabre:v:38:y:2017:i:4:d:10.1007_s12122-017-9259-2 is not listed on IDEAS
    9. Andrea Dello Sbarba & Riccardo Giannetti & Alessandro Marelli, 2015. "A field study of Value-Based Management sophistication: The role of shareholders," MANAGEMENT CONTROL, FrancoAngeli Editore, vol. 2015(2), pages 65-100.
    10. Tetlock, Philip E. & Vieider, Ferdinand M. & Patil, Shefali V. & Grant, Adam M., 2013. "Accountability and ideology: When left looks right and right looks left," Organizational Behavior and Human Decision Processes, Elsevier, vol. 122(1), pages 22-35.
    11. Grafton, Jennifer & Lillis, Anne M. & Widener, Sally K., 2010. "The role of performance measurement and evaluation in building organizational capabilities and performance," Accounting, Organizations and Society, Elsevier, vol. 35(7), pages 689-706, October.
    12. Macinati, Manuela S. & Bozzi, Stefano & Rizzo, Marco Giovanni, 2016. "Budgetary participation and performance: The mediating effects of medical managers’ job engagement and self-efficacy," Health Policy, Elsevier, vol. 120(9), pages 1017-1028.
    13. Allan Hansen, 2011. "Relating performative and ostensive management accounting research: Reflections on case study methodology," Qualitative Research in Accounting & Management, Emerald Group Publishing, vol. 8(2), pages 108-138, June.
    14. repec:bla:abacus:v:52:y:2016:i:4:p:685-771 is not listed on IDEAS
    15. Catherine Thomas, 2011. "Too Many Products: Decentralized Decision Making in Multinational Firms," American Economic Journal: Microeconomics, American Economic Association, vol. 3(1), pages 280-306, February.

    More about this item

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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