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Fishing for Excuses and Performance Evaluation


  • François Larmande
  • Jean-Pierre Ponssard


We study a principal-agent model in which the agent can provide ex post additional relevant information regarding his performance. In particular, he can provide a legitimate excuse, that is, evidence that a poor result is only due to factors outside his control. However, building a convincing case requires time, time that is not spent on exerting productive effort, and thus generating information represents an opportunity cost. We obtain necessary and sufficient conditions for the principal to prefer a policy of adjusting ex post the performance measure for the information provided by the agent to a policy of conforming to a result-based system with no adjustments. The risk aversion and a possible limited liability of the agent play an important role in the analysis. This paper clarifies the issues associated with the so-called "excuse culture" prevailing in some organizations.

Suggested Citation

  • François Larmande & Jean-Pierre Ponssard, 2014. "Fishing for Excuses and Performance Evaluation," CESifo Working Paper Series 4569, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_4569

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    References listed on IDEAS

    1. Bentley W. MacLeod, 2003. "Optimal Contracting with Subjective Evaluation," American Economic Review, American Economic Association, vol. 93(1), pages 216-240, March.
    2. Joel S. Demski & Hans Frimor & David E. M. Sappington, 2004. "Efficient Manipulation in a Repeated Setting," Journal of Accounting Research, Wiley Blackwell, vol. 42(1), pages 31-49, March.
    3. Fudenberg, Drew & Tirole, Jean, 1990. "Moral Hazard and Renegotiation in Agency Contracts," Econometrica, Econometric Society, vol. 58(6), pages 1279-1319, November.
    4. Sunil Dutta, 2002. "The Effect of Earnings Forecasts on Earnings Management," Journal of Accounting Research, Wiley Blackwell, vol. 40(3), pages 631-655, June.
    5. Larmande, Francois, 2013. "Limited liability, the first-order approach, and the ranking of information systems in agencies," Economics Letters, Elsevier, vol. 118(2), pages 314-317.
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    More about this item


    performance measurement; manipulation; controllability principle; excuse culture; influence activity;

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

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