Ranking Performance Measures in Multi-Task Agencies

The Accounting Review, 85(5), September 2010, pp 1545-1575

University of Alberta School of Business Research Paper No. 2013-1091

Posted: 2 Jul 2013

See all articles by Peter O. Christensen

Peter O. Christensen

Copenhagen Business School - Department of Finance

Florin Sabac

University of Alberta - Department of Accounting, Operations & Information Systems

Jie (Joyce) Tian

University of Alberta - Department of Accounting, Operations & Information Systems

Multiple version iconThere are 2 versions of this paper

Date Written: December 1, 2009

Abstract

We derive sufficient conditions for ranking performance evaluation systems in multi-task agency models (using both optimal and linear contracts) in terms of a second-order stochastic dominance (SSD) condition on the likelihood ratios. The SSD condition can be replaced by a variance-covariance matrix of likelihood ratios (VCM) condition when the utility function is square-root, the performance measures are normally distributed, and for LEN models. We identify existing results derived under the LEN assumptions that rely on the VCM condition and, thus, also hold for optimal contracts.

Keywords: Likelihood ratios, Multiple tasks, LEN

JEL Classification: M46

Suggested Citation

Christensen, Peter Ove and Sabac, Florin and Tian, Jie (Joyce), Ranking Performance Measures in Multi-Task Agencies (December 1, 2009). The Accounting Review, 85(5), September 2010, pp 1545-1575, University of Alberta School of Business Research Paper No. 2013-1091, Available at SSRN: https://ssrn.com/abstract=2283318

Peter Ove Christensen (Contact Author)

Copenhagen Business School - Department of Finance ( email )

Solbjerg Plads 3
Frederiksberg, DK-2000
Denmark
+45 6140 3237 (Phone)

Florin Sabac

University of Alberta - Department of Accounting, Operations & Information Systems ( email )

Edmonton, Alberta T6G 2R6
Canada

Jie (Joyce) Tian

University of Alberta - Department of Accounting, Operations & Information Systems ( email )

Edmonton, Alberta T6G 2R6
Canada

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