Performance Evaluations and Efficient Sorting

44 Pages Posted: 11 Dec 2007

See all articles by Korok Ray

Korok Ray

University of Chicago GSB

Multiple version iconThere are 2 versions of this paper

Date Written: 2007-02-06

Abstract

Much of the production in firms takes place over time. This paper seeks to understand the value of interim performance information on long projects. In particular, the model explores the sorting effects of performance evaluations. Conducting an interim performance evaluation increases efficiency by providing the option to end projects with low early returns. The main result: It is efficient to allocate more resources towards the end of a project. This result holds under a variety of scenarios: when the worker has unknown ability, when the outside options vary with output, and even under an agency framework with a risk-averse agent.

Suggested Citation

Ray, Korok, Performance Evaluations and Efficient Sorting (2007-02-06). Journal of Accounting Research, Vol. 45, Issue 4, pp. 839-882, September 2007. Available at SSRN: https://ssrn.com/abstract=1065886 or http://dx.doi.org/10.1111/j.1475-679X.2007.00253.x

Korok Ray (Contact Author)

University of Chicago GSB ( email )

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