Determinants of the use of value-based performance measures for managerial performance evaluation

Research output: Contribution to JournalArticleAcademicpeer-review

Abstract

As value-based (VB) performance measures include firms' cost of capital, they are considered more congruent than earnings measures. Prior studies, however, find that their use for managerial performance evaluation is less extensive than their presumed benefits would suggest. We examine how the importance of VB measures for evaluation varies with firms' need and managers' opportunity to manage capital costs, and find this to increase with a need for intensive asset use, delegated authority and reduced unit interdependencies. In addition, importance of intensive asset use simultaneously limits the delegation of authority, partially offsetting the increase in importance of VB measures. © 2013 Blackwell Publishing Ltd.
Original languageEnglish
Pages (from-to)1214-1239
JournalJournal of Business Finance and Accounting
Volume39
Issue number9-10
DOIs
Publication statusPublished - 2012

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Managerial performance
Performance measures
Performance evaluation
Authority
Assets
Evaluation
Delegation
Interdependencies
Cost of capital
Capital cost
Managers

Cite this

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title = "Determinants of the use of value-based performance measures for managerial performance evaluation",
abstract = "As value-based (VB) performance measures include firms' cost of capital, they are considered more congruent than earnings measures. Prior studies, however, find that their use for managerial performance evaluation is less extensive than their presumed benefits would suggest. We examine how the importance of VB measures for evaluation varies with firms' need and managers' opportunity to manage capital costs, and find this to increase with a need for intensive asset use, delegated authority and reduced unit interdependencies. In addition, importance of intensive asset use simultaneously limits the delegation of authority, partially offsetting the increase in importance of VB measures. {\circledC} 2013 Blackwell Publishing Ltd.",
author = "H.C. Dekker and T.L.C.M. Groot and M. Schoute and E. Wiersma",
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journal = "Journal of Business Finance and Accounting",
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T1 - Determinants of the use of value-based performance measures for managerial performance evaluation

AU - Dekker, H.C.

AU - Groot, T.L.C.M.

AU - Schoute, M.

AU - Wiersma, E.

PY - 2012

Y1 - 2012

N2 - As value-based (VB) performance measures include firms' cost of capital, they are considered more congruent than earnings measures. Prior studies, however, find that their use for managerial performance evaluation is less extensive than their presumed benefits would suggest. We examine how the importance of VB measures for evaluation varies with firms' need and managers' opportunity to manage capital costs, and find this to increase with a need for intensive asset use, delegated authority and reduced unit interdependencies. In addition, importance of intensive asset use simultaneously limits the delegation of authority, partially offsetting the increase in importance of VB measures. © 2013 Blackwell Publishing Ltd.

AB - As value-based (VB) performance measures include firms' cost of capital, they are considered more congruent than earnings measures. Prior studies, however, find that their use for managerial performance evaluation is less extensive than their presumed benefits would suggest. We examine how the importance of VB measures for evaluation varies with firms' need and managers' opportunity to manage capital costs, and find this to increase with a need for intensive asset use, delegated authority and reduced unit interdependencies. In addition, importance of intensive asset use simultaneously limits the delegation of authority, partially offsetting the increase in importance of VB measures. © 2013 Blackwell Publishing Ltd.

U2 - 10.1111/jbfa.12004

DO - 10.1111/jbfa.12004

M3 - Article

VL - 39

SP - 1214

EP - 1239

JO - Journal of Business Finance and Accounting

JF - Journal of Business Finance and Accounting

SN - 0306-686X

IS - 9-10

ER -