Comparing the Use of Forward-Looking and Contemporary Performance Measurement to Formulate Incentive Contracts in the Presence of the Horizon Problem: An Experimental Analysis

Revista Contabilidade & Finanças

Luis Paulo Guimarães Dos Santos¹ 

关键词: incentive contracts;    performance measurement;    horizon problem;    contratos de incentivo;    mensuração de desempenho;    problema do horizonte;   

DOI  :  10.1590/1808-057x201501060

来源: SciELO

【 摘 要 】

This study compares the use of forward-looking and contemporary performance measurement in incentive contracts in the presence of the horizon problem. To do this, we used a single-factor experiment between pre- and post-treatment subjects, with a control group. The study had the participation of 76 undergraduate students, divided into 3 groups, and it registered that, when compared to the control group and the treatment group linked to contemporary performance measurement, the participants under the contract that rewarded having a forward-looking measurement as a basis acted more congruently with the long-term goal set for the experimental task. Consistent with predictions of the agency theory, the main finding of this research suggests that economic profit helps mitigating the problem of manage rial myopia, indicating that incorporate it to contracts motivates agents to act more consistently with the company's long-term goals, even in the presence of the horizon problem. Besides, the study registered new evidence of the inadequacy of formulating incentive contracts having distorted performance measurements as a basis, such as book profit.

【 授权许可】

CC BY   
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