43 research outputs found
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
The effect of horizontal pay dispersion on the effectiveness of performance-based incentives
In response to general calls for increased transparency in society, pay transparency
policies are growing in importance. Given that pay transparency unavoidably gives employees the
opportunity to make comparisons between themselves and others, in this study we address the
question of how these comparisons impact the incentive effects of performance contingent pay,
and consequently their performance outcomes. Specifically, we empirically examine whether
horizontal pay dispersion alters the effectiveness of performance-based pay contracts, which firms
typically use to incentivize effort. Exploiting our unique access to a large healthcare provider, we
document the moderating role of horizontal pay dispersion on the effectiveness of individual
monetary incentives at generating increased individual performance. To provide a more nuanced
understanding of the moderating effect of pay dispersion, we further examine the boundary
conditions of the proposed interaction. In particular, we examine the differential effect of overall
pay dispersion on employees that rank high versus low in the pay distribution and disaggregate
overall pay dispersion into performance-related versus performance-unrelated pay dispersion. Our
findings consistently show a positive moderating effect of pay dispersion when employees are
more likely to consider the observed pay dispersion as legitimate, and a negative moderation effect
when this is less likely the case. Our study strengthens the understanding of how individual level
incentives function in the context of a multi-person firm setting. Our results document that
individual incentives are effective, but also suggest that pay dispersion can have a significant
influence on the incentive-performance relation. These findings provide some evidence that
individuals are concerned not only with their own payout, but also with that of others, and that this
concern has a significant impact on individual’s effort provision, and consequently performance.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
Tone from the Top in Risk Management: A Complementarity Perspective on How Control Systems Influence Risk Awareness
Prompted by the weaknesses of standardized risk management approaches in the aftermath of the
2008 financial crisis, scholars, regulators, and practitioners alike emphasize the importance of
creating a risk-aware culture in organizations. Recent insights highlight the special role of tone
from the top as crucial driver of risk awareness. In this study, we take a systems-perspective on
control system design to investigate the role of tone from the top in creating risk awareness. In
particular, we argue that both interactive and diagnostic use of budgets and performance measures
interact with tone from the top in managing risk awareness. Our results show that interactive control
strengthens the effect of tone from the top on risk awareness, while tone from the top and diagnostic
control are, on average, not interrelated with regard to creating risk awareness. To shed light on the
boundary conditions of the proposed interdependencies, we further investigate whether the
predicted interdependencies are sensitive to the level of perceived environmental uncertainty. We
find that the effect of tone from the top and interactive control becomes significantly stronger in a
situation of high perceived environmental uncertainty. Most interestingly, tone from the top and
diagnostic control are complements with regard to risk awareness in settings of low perceived
environmental uncertainty and substitutes at high levels of perceived environmental uncertainty.Series: Department of Strategy and Innovation Working Paper Serie
Empirische Forschung zu Management Control – Ein Überblick und neue Trends
Unternehmen verwenden Management Control Systeme, um
die Strategie zu implementieren und sicherzustellen, dass MitarbeiterInnen im Sinne
des Unternehmens handeln. Diese umfassen sowohl formale Steuerungsmechanismen
(z.B. Anreiz- und Monitoring-Systeme), als auch informelle Steuerungsmechanismen
(z. B. MitarbeiterInnenselektion und Unternehmenskultur). In diesem
Beitrag geben wir einen Ăśberblick zum aktuellen Stand der empirischen Management
Control Forschung und besprechen diese anhand dreier Literaturströmungen.
Im ersten Teil beschreiben wir welche Steuerungsmechanismen zur VerfĂĽgung stehen
und was die Management Control Forschung bisher dazu erarbeitet hat. Darauf
aufbauend beschreiben wir im zweiten Teil den sogenannten Kontingenzansatz, in
dem untersucht wird, wie der Unternehmenskontext die Anwendung und Wirkung
der Steuerungsmechanismen beeinflusst. Im dritten Teil gehen wir schlieĂźlich auf
Interdependenzen zwischen den Steuerungsmechanismen ein. In jedem dieser Teile
wird auf bestehende ForschungslĂĽcken hingewiesen. Im letzten Teil des Beitrags
wird schlieĂźlich ein Ausblick darĂĽber gegeben, wie der Trend hin zur Wissensgesellschaft
sowie zur kĂĽnstlichen Intelligenz und Big Data die Management Control
Forschung zukünftig prägen wird
Determinants and Consequences of Budget Reallocations*
We investigate the determinants and consequences of budget reallocations—that is, corrective changes to the budget made during the year. Using proprietary data from a large consumer goods manufacturer, we analyze the extent to which initial budgeting decisions drive reallocations. Examining this relationship is important because initial budget negotiations are often troubled by power struggles and politicking, which may give rise to the need for reallocations. We hypothesize that one important driver of reallocation decisions is the firm's aim to correct systematic deviations from the optimal initial budget that were driven by lobbying during the initial budgeting process. We find evidence that is consistent with this prediction. In a more exploratory analysis, we show that reallocations do not have the desired effects on market performance. In particular, budget cuts are negatively associated with a product's change in market share. More surprisingly, while budget increases do help product lines achieve their sales targets in the last quarter, they do not boost market share. Our results demonstrate that efficient investment planning is essential to achieve an improvement in market performance
1st Dutch Accounting Research Conference (DARC)
On June 4 2015, the 1st Dutch Accounting Research Conference (DARC) took place in Maastricht at the Maastricht University School of Business and Economics. More than 60 accounting academics from eight Dutch universities participated in the conference, 20% of which were PhD students. The purpose of the conference is to provide feedback on each other’s work, exchange ideas, and discuss (the relevance of) recent developments in academia that affect all Dutch accounting departments