IDEAS home Printed from https://ideas.repec.org/p/ces/ceswps/_1257.html
   My bibliography  Save this paper

EVA and the Controllability-congruence Trade-off: An Empirical Investigation

Author

Listed:
  • François Larmande
  • Jean-Pierre Ponssard

Abstract

Incentives theory suggests that compensation schemes should be analyzed along two dimensions: controllability and congruence. Most schemes cannot satisfy both criteria at once. EVA bonus schemes, a major managerial innovation of the 90’s, favor the congruence criterion. This paper questions ist properties along the controllability dimension. The question is addressed through an in-depth case study: after three years in operation the actual bonuses paid by the system, as well as qualitative feedback from the managers involved, are analyzed. It is argued that EVA bonus schemes may have a major controllability problem.

Suggested Citation

  • François Larmande & Jean-Pierre Ponssard, 2004. "EVA and the Controllability-congruence Trade-off: An Empirical Investigation," CESifo Working Paper Series 1257, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_1257
    as

    Download full text from publisher

    File URL: http://www.cesifo-group.de/DocDL/cesifo1_wp1257.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Jerold L. Zimmerman, 1997. "Eva And Divisional Performance Measurement: Capturing Synergies And Other Issues," Journal of Applied Corporate Finance, Morgan Stanley, vol. 10(2), pages 98-109.
    2. John M. Abowd & David S. Kaplan, 1999. "Executive Compensation: Six Questions That Need Answering," Journal of Economic Perspectives, American Economic Association, vol. 13(4), pages 145-168, Fall.
    3. Holmstrom, Bengt & Milgrom, Paul, 1991. "Multitask Principal-Agent Analyses: Incentive Contracts, Asset Ownership, and Job Design," Journal of Law, Economics, and Organization, Oxford University Press, vol. 7(0), pages 24-52, Special I.
    4. Stephen Riceman & Steven Cahan & Mohan Lal, 2002. "Do managers perform better under EVA bonus schemes?," European Accounting Review, Taylor & Francis Journals, vol. 11(3), pages 537-572.
    5. Baker, George P, 1992. "Incentive Contracts and Performance Measurement," Journal of Political Economy, University of Chicago Press, vol. 100(3), pages 598-614, June.
    6. Wallace, James S., 1997. "Adopting residual income-based compensation plans: Do you get what you pay for?," Journal of Accounting and Economics, Elsevier, vol. 24(3), pages 275-300, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Nicolas Berland & Jean-Pierre Ponssard & Olivier Saulpic, 2017. "Une typologie des systèmes de contrôle inspirée du cadre théorique de Simons," Working Papers hal-01667078, HAL.
    2. Nicolas Berland & Jean-Pierre Ponssard & Olivier Saulpic, 2006. "Recurrent Attempts to Renovate Management ControlRevisited through a Simons' Perspective," Working Papers hal-00243033, HAL.
    3. repec:dau:papers:123456789/3053 is not listed on IDEAS
    4. Olivier Saulpic & Jean-Pierre Ponssard, 2008. "Les systèmes de pilotage : une relecture critique inspirée des travaux de Simons," Post-Print halshs-00525975, HAL.
    5. Franco Mariuzzo & Patrick Paul Walsh & Ciara Whelan, 2004. "EU Merger Control in Differentiated Product Industries," CESifo Working Paper Series 1312, CESifo Group Munich.
    6. repec:dau:papers:123456789/3143 is not listed on IDEAS

    More about this item

    Keywords

    EVA management compensation; controllability-congruence trade-off; compensation standards;

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_1257. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Klaus Wohlrabe). General contact details of provider: http://edirc.repec.org/data/cesifde.html .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.