The Effects of Firm-Provided Measure Weightings on Evaluators' Incorporation of Non-Contractible Information

Posted: 24 Jul 2013 Last revised: 21 Feb 2016

See all articles by James H. Long

James H. Long

Auburn University - School of Accountancy

Lasse Mertins

Johns Hopkins University - Carey Business School

Brian Vansant

Auburn University - Raymond J. Harbert College of Business - School of Accountancy

Date Written: June 1, 2014

Abstract

Subjective performance evaluation systems often prescribe for evaluators to use multiple measures to assess overall subordinate performance. Firms can choose to explicitly provide suggested weights to "balance" the relative weight evaluators place on each measure. However, we theorize that doing so may also affect evaluators' perceptions regarding the extent to which the firm intends for them to exercise subjectivity in their evaluations. We conducted an experiment in which evaluators use four measures to subjectively evaluate a subordinate's overall performance. Evaluators were also provided with relevant non-contractible information, although evaluators were not explicitly required to consider this information. We find that the provision of weights reduces the extent to which evaluators employ subjectivity to incorporate noncontractible information, which is manifested in larger outcome effects. Our results suggest firms should carefully consider what the structure and characteristics of their performance evaluation systems communicate to evaluators regarding the role of subjectivity.

Keywords: subjective performance evaluation, non-contractible information, performance measure weights, outcome effect

JEL Classification: M40

Suggested Citation

Long, James H. and Mertins, Lasse and Vansant, Brian, The Effects of Firm-Provided Measure Weightings on Evaluators' Incorporation of Non-Contractible Information (June 1, 2014). Journal of Management Accounting Research, Vol. 27, No. 1, 2015, Available at SSRN: https://ssrn.com/abstract=2297031 or http://dx.doi.org/10.2139/ssrn.2297031

James H. Long

Auburn University - School of Accountancy ( email )

301 Lowder Hall
Auburn University, AL 36849
United States
(334) 844-6214 (Phone)

HOME PAGE: http://www.jameshlong.com

Lasse Mertins

Johns Hopkins University - Carey Business School ( email )

100 International Drive
Baltimore, MD 21202
United States

Brian Vansant (Contact Author)

Auburn University - Raymond J. Harbert College of Business - School of Accountancy ( email )

415 West Magnolia Avenue
301 Lowder Hall
Auburn, AL 36849
United States
(333) 844-6218 (Phone)

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