Middle Management's Performance Metrics under Internal Transfer System

Abstract

This paper studies the performance metrics of the middle management in the cost centers of firms from the empirical perspective of internal transfer price mechanism. As firms’ middle managements are usually in charge of business units, this paper will use these business units’ results as the performance metrics of the respective middle management who are responsible for these business units. This paper develops a comprehensive methodology to forecast the performance results for business units, which could be specified as the performance targets of the respective middle management in next performance period. Furthermore, this paper develops a feasible process to predict the extreme performance of business units in next measurement period, and the results could become important components of comprehensive performance measurement for the respective middle management.

Keywords: middle management, performance metrics, internal transfer system, performance target, operation performance, accounting performance, performance extreme.

JEL Classification: M41, J53, C53, J41