The Interplay between Forward-Looking Measures and Target Setting

Management Science, 2016

Posted: 5 May 2017

See all articles by Jan Bouwens

Jan Bouwens

Amsterdam Business School

Peter Kroos

University of Amsterdam - Amsterdam Business School

Date Written: July 2016

Abstract

We examine whether financial targets are based on both forward-looking and financial information, rather than on financial information only. We collect sales and performance appraisal data of store managers in a retail chain. The firm issues directives focused on the provision of excellent customer service and assesses store managers’ compliance with these directives subjectively. We demonstrate that, controlling for current sales, compliance with directives scores predicts future sales performance. We find that, next to objective sales information, this forward-looking information is impounded in the next year’s sales target. Finally, we find some evidence that suggests that incorporating forward-looking information improves the accuracy of sales targets.

Keywords: accounting economics, behavior, information, goals, motivation/incentives

JEL Classification: M11, M12, M14, M41, M55

Suggested Citation

Bouwens, Jan and Kroos, Peter, The Interplay between Forward-Looking Measures and Target Setting (July 2016). Management Science, 2016, Available at SSRN: https://ssrn.com/abstract=2963519

Jan Bouwens (Contact Author)

Amsterdam Business School ( email )

Roetersstraat 11
Amsterdam, 1018 WB
Netherlands
+31 20 5258740 (Phone)

Peter Kroos

University of Amsterdam - Amsterdam Business School ( email )

Plantage Muidergracht 12
Amsterdam, 1018 TV
Netherlands

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