Dynamic incentives and responsibility accounting

Article Abstract:

A two-period sequentially optimal agency model was used to study the impact of the ratchet effect on the firm's choice of responsibility assignment and incentives for motivating managers. Results revealed that the ratchet effect can be mitigated by using more aggregate performance measures and greater consolidation of responsibility. Moreover, consolidating responsibility for two activities for a single manager seems to be more efficient than a responsibility accounting structure.

Analysis, Compensation and benefits, Executives, Executive compensation, Employee performance appraisals, Performance appraisals, Incentives (Business)

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Reply to: dynamic incentives and responsibility accounting: a comment

Article Abstract:

The authors rebut a rebuttal regarding whether a ratchet effect takes place from low commitment in a contract.

Science & research, Research, Economic aspects, Contracts, Achievement motivation, Commitment (Psychology)

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Dynamic incentives and dual-purpose accounting

Article Abstract:

Employee incentive calculations and a multi-purpose accounting method for this is presented.

Accounting Methods, Wage Administration, Methods, Accounting, Employee incentives, Compensation management

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