Premium
Determinants of the Use of Value‐based Performance Measures for Managerial Performance Evaluation
Author(s) -
Dekker Henri C.,
Groot Tom,
Schoute Martijn,
Wiersma Eelke
Publication year - 2012
Publication title -
journal of business finance and accounting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.282
H-Index - 77
eISSN - 1468-5957
pISSN - 0306-686X
DOI - 10.1111/jbfa.12004
Subject(s) - interdependence , business , earnings , delegation , asset (computer security) , performance measurement , value (mathematics) , capital (architecture) , unit (ring theory) , actuarial science , economics , accounting , marketing , computer science , mathematics education , computer security , management , archaeology , mathematics , machine learning , political science , law , history
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.