Providing Learning Incentives and the Use of a Multi-Purpose Performance Measure
20 Pages Posted: 16 Apr 2014 Last revised: 26 Apr 2014
Date Written: October 19, 2013
Abstract
This paper analyses the role of leading indicators that provide a firm manager with learning incentives of firm-specific skills. The effectiveness of leading indicators varies with contract scheme hired between the firm owner and the firm manager. I show that the leading indicator complements the outcome’s role of incentive provision at the sacrifice of information rent caused by the information asymmetry regarding manager’s learning capacity.
Keywords: Informativeness; Leading Indicators; Learning effort; Moral hazard; Short-term contracts
JEL Classification: D82, J41, M40
Suggested Citation: Suggested Citation