File Download
  Links for fulltext
     (May Require Subscription)
Supplementary

Article: Optimal Performance Targets

TitleOptimal Performance Targets
Authors
Hu, PLi, YRay, K
KeywordsCompensation contract
Moral hazard
Performance target
Issue Date2021
PublisherAmerican Accounting Association. The Journal's web site is located at http://aaapubs.org/loi/jmar
Citation
Journal of Management Accounting Research, 2021, v. 33 n. 2, p. 129-149 How to Cite?
DOI: http://dx.doi.org/10.2308/JMAR-18-032
AbstractWe study a class of contracts that is becoming ever more common among executives, in which the manager earns a discrete bonus if performance clears an explicit threshold. These performance targets provide the firm with an additional instrument to resolve its moral hazard problem with its manager. The performance target can achieve first-best under risk neutrality, with a target precisely equal to the desired effort that the firm seeks to induce. The optimal bonus increases in risk. If the manager is sufficiently risk-averse, the firm will shade the optimal target below equilibrium effort to provide a form of insurance to the manager, outside of the standard reduction in the bonus. © 2021, American Accounting Association.
Persistent Identifierhttp://hdl.handle.net/10722/302437
ISSN
1049-2127
2020 SCImago Journal Rankings: 1.307
ISI Accession Number ID
WOS:000674621500006

 

DC FieldValueLanguage
dc.contributor.authorHu, P-
dc.contributor.authorLi, Y-
dc.contributor.authorRay, K-
dc.date.accessioned2021-09-06T03:32:16Z-
dc.date.available2021-09-06T03:32:16Z-
dc.date.issued2021-
dc.identifier.citationJournal of Management Accounting Research, 2021, v. 33 n. 2, p. 129-149-
dc.identifier.issn1049-2127-
dc.identifier.urihttp://hdl.handle.net/10722/302437-
dc.description.abstractWe study a class of contracts that is becoming ever more common among executives, in which the manager earns a discrete bonus if performance clears an explicit threshold. These performance targets provide the firm with an additional instrument to resolve its moral hazard problem with its manager. The performance target can achieve first-best under risk neutrality, with a target precisely equal to the desired effort that the firm seeks to induce. The optimal bonus increases in risk. If the manager is sufficiently risk-averse, the firm will shade the optimal target below equilibrium effort to provide a form of insurance to the manager, outside of the standard reduction in the bonus. © 2021, American Accounting Association.-
dc.languageeng-
dc.publisherAmerican Accounting Association. The Journal's web site is located at http://aaapubs.org/loi/jmar-
dc.relation.ispartofJournal of Management Accounting Research-
dc.subjectCompensation contract-
dc.subjectMoral hazard-
dc.subjectPerformance target-
dc.titleOptimal Performance Targets-
dc.typeArticle-
dc.identifier.emailHu, P: kerihu@hku.hk-
dc.identifier.authorityHu, P=rp02854-
dc.description.naturepostprint-
dc.identifier.doi10.2308/JMAR-18-032-
dc.identifier.scopuseid_2-s2.0-85111772539-
dc.identifier.hkuros324849-
dc.identifier.volume33-
dc.identifier.issue2-
dc.identifier.spage129-
dc.identifier.epage149-
dc.identifier.isiWOS:000674621500006-
dc.publisher.placeUnited States-

Export via OAI-PMH Interface in XML Formats

OR

Export to Other Non-XML Formats