The Effects of Performance Report Layout on Managers’ Subjective Evaluation Judgments

Accounting and Business Research, 47(7), 731-751.

39 Pages Posted: 15 Oct 2013 Last revised: 8 Apr 2020

See all articles by Victor S. Maas

Victor S. Maas

University of Amsterdam - Amsterdam Business School

Niels Verdoorn

DRV Corporate Finance

Date Written: August 7, 2015

Abstract

Managers tend to provide subjective performance evaluations that are relatively high (leniency) and not very dispersed (compression). This paper reports on an experiment that investigates whether the layout of performance reports affects the leniency and compression of managers’ subjective evaluations. Relying on psychology theory, we predict that subjective ratings will be higher and more compressed if performance reports contain alphabetically listed indicators rather than categorically listed indicators (as in a balanced scorecard). Moreover, we predict that ratings will be higher and more compressed if performance reports present indicator target and actual values in tables than when this information is presented in graphs. The results from the experiment provide support for the hypothesis that performance ratings are higher if measures are listed in alphabetical order as opposed to presented in a four-category balanced scorecard format. However, there is no support for the other hypotheses. We discuss the implications of the study for accounting research and practice.

Keywords: subjective performance evaluation, leniency, compression, presentation format, performance report layout, balanced scorecard

Suggested Citation

Maas, Victor S. and Verdoorn, Niels, The Effects of Performance Report Layout on Managers’ Subjective Evaluation Judgments (August 7, 2015). Accounting and Business Research, 47(7), 731-751., Available at SSRN: https://ssrn.com/abstract=2340394 or http://dx.doi.org/10.2139/ssrn.2340394

Victor S. Maas (Contact Author)

University of Amsterdam - Amsterdam Business School ( email )

Spui 21
Amsterdam, 1018 WB
Netherlands

Niels Verdoorn

DRV Corporate Finance ( email )

Rotterdam
Netherlands

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