Determinants and consequences of budget reallocations

We investigate the determinants and consequences of budget reallocations, i.e., corrective actions to the budget made during the year. Using proprietary data of a large consumer goods manufacturer, we analyze the extent to which allocation decisions regarding the initial budget drive subsequent reallocations. Whenever scarce resources need to be allocated among a number of individuals, power struggles and politicking behavior are likely to arise, which potentially affects the outcome of the allocation process. We hypothesize and find that one important driver of reallocation decisions is the firm's aim to correct for systematic deviations from the optimal initial budget allocation that are driven by successful lobbying activities during the initial budgeting process. In a more exploratory analysis, we show that such reallocations do not have the desired effects on market-place performance. In particular, budget cuts are negatively associated with a product's change in market share. More surprisingly, while budget boosts do help product lines internally to achieve their sales targets in the last quarter, they do not have a (positive) effect on the change in market share. Most importantly, our results demonstrate that efficient investment planning ex ante is essential to achieve an improvement in market-place performance, highlighting the value of budgeting.Series: Department of Strategy and Innovation Working Paper Serie

How calibration committees can mitigate performance evaluation bias: An analysis of implicit incentives

While prior research on performance evaluation bias has mainly focused on the determinants and consequences of rating errors, we investigate how a firm can provide implicit incentives to supervisors to mitigate these errors via its calibration committee. We empirically examine the extent to which a calibration committee incorporates supervisors' evaluation behavior with respect to their subordinates in the performance evaluation outcomes, i.e., performance ratings and promotion decisions, for these supervisors. In our study, we distinguish between lack of skills and opportunism as two important facets of evaluation behavior, which we expect the calibration committee to address differently. Using panel data of a professional service firm, we show that supervisors' opportunistic behavior to strategically inflate subordinates' performance ratings is disciplined through a decrease in the supervisors' own performance rating, while the supervisors' skills to provide less compressed and thus more informative performance ratings is rewarded through a higher likelihood of promotion.Series: Department of Strategy and Innovation Working Paper Serie

Discretion and Bias in Performance Evaluation: The Impact of Diversity and Subjectivity

In this paper, I use a proprietary archival data set of one firm to examine the impact of performance measure diversity and the use of subjective performance measures on performance evaluation bias. The data set used is unique in the sense that it provides detailed information about a number of components of the subordinate-specific incentive contract, such as, the ‘incentive weights’ for both objective and subjective performance measures and the number of objective and subjective performance measures. The empirical results indicate that discretion, due to performance measure diversity and subjectivity, is related to performance evaluation bias. More specifically, I find that increased discretion is related to a compression of performance ratings and more lenient performance ratings. These results suggest that increasing the number of performance measures and using subjectivity in performance evaluation make it more difficult to differentiate among subordinates, which can lead to problems in personnel decisions and future incentives.Economics ;

Management control systems have evolved to address the need for innovation

Traditional accounting control systems aren't seen as doing the job, argue Robert Chenhall and Frank Moer

Regulator Leniency and Mispricing in Beneficent Nonprofits

We posit that nonprofits that provide a greater supply of unprofitable services (beneficent nonprofits) face lenient regulatory enforcement for mispricing in price-regulated markets. Consequently, beneficent nonprofits exploit such regulatory leniency and exhibit higher mispricing. Drawing on organizational legitimacy theory, we argue that both regulators and beneficent nonprofits seek to protect their legitimacy with stakeholders, including those who demand access to unprofitable services. Using data from hospitals, we examine mispricing via “upcoding”, which involves misclassifying ailment severity. Archival analysis indicates less stringent regulatory enforcement of upcoding for beneficent nonprofit hospitals, defined as hospitals that provide higher charity care and medical education. After observing regulator leniency, beneficent hospitals demonstrate higher upcoding. Our results suggest that lenient enforcement assists beneficent nonprofits to obtain higher revenues in price-regulated markets

Antithrombotic Management in Adult Kidney Transplantation: A European survey study

In kidney transplantation (KTx), renal graft thrombosis (RGT) is one of the main reasons for early graft loss. Although evidence-based guidance on prevention of RGT is lacking, thromboprophylaxis is widely used. The aim of this survey was to obtain a European view of the different thromboprophylactic strategies applied in KTx. An online 22-question survey, addressed to KTx professionals, was distributed by email and via platforms of the European Society for Organ Transplantation. Seventy-five responses (21 countries, 51 centers) were received: 75% had over 10 years' clinical experience, 64% were surgeons, 29% nephrologists, and 4% urologists. A written antithrombotic management protocol was available in 75% of centers. In 8 (16%) centers, respondents contradicted each other regarding the availability of a written protocol. Thromboprophylaxis is preferred by 78% of respondents, independent of existing antithrombotic management protocols. Ninety-two percent of respondents indicated that an anticipated bleeding risk is the main reason to discontinue chronic antithrombotic therapy preoperatively. Intraoperatively, 32% of respondents administer unfractionated heparin (400-10,000 international units with a median of 5,000) in selected cases. Despite an overall preference for perioperative thromboprophylaxis in KTx, there is a high variation within Europe regarding type, timing, and dosage, most likely due to the paucity of high-quality studies. Further research is warranted in order to develop better guidelines.</p