Dual Purpose Measures
35 Pages Posted: 23 Jul 2003
Date Written: May 2003
We examine a firm's choice of a measurement system designed to serve two distinct objectives; provide forward-looking information about future firm productivity and ex post information about past managerial performance. A firm can have two separate measurements, one for each purpose, or a single measure that simultaneously serves both objectives. In a two-period principal-agent model, we illustrate how implicit incentives can lead firms to prefer a single dual-purpose measure.
Keywords: accounting measures, incentives, multi-period
JEL Classification: J33, L22, M41, M46
Suggested Citation: Suggested Citation
Feltham, Gerald A. and Indjejikian, Raffi J. and Nanda, Dhananjay, Dual Purpose Measures (May 2003). Sauder School of Business Working Paper, Available at SSRN: https://ssrn.com/abstract=418120 or http://dx.doi.org/10.2139/ssrn.418120
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