Dual Purpose Measures

35 Pages Posted: 23 Jul 2003

See all articles by Gerald A. Feltham

Gerald A. Feltham

University of British Columbia

Raffi Indjejikian

University of Michigan at Ann Arbor - Accounting

Dhananjay Nanda

University of Miami - Department of Accounting

Date Written: May 2003

Abstract

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

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

Gerald A. Feltham

University of British Columbia ( email )

2053 Main Mall
Vancouver, BC V6T 1Z2
Canada
604-822-8397 (Phone)
604-822-9470 (Fax)

Raffi J. Indjejikian (Contact Author)

University of Michigan at Ann Arbor - Accounting ( email )

701 Tappan Street
Ann Arbor, MI 48109-1234
United States

Dhananjay Nanda

University of Miami - Department of Accounting ( email )

Coral Gables, FL 33146-6531
United States

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