The Effect of Behaviour Monitoring and Uncertainty on the Use of Performance-Contingent Compensation

Leslie Kren, Jeffrey Kerr

Research output: Contribution to journalArticle

31 Citations (Scopus)

Abstract

The objective of this study is to examine the effects of control system characteristics and perceived environmental uncertainty on the relative use of performance-contingent compensation. The results, based on a survey of division managers, indicate that monitoring ability is negatively associated with the use of performance-contingent compensation. In addition, monitoring is found to moderate the relationship between uncertainty and compensation system design. Whereas in non-monitoring firms, higher levels of uncertainty are associated with increased use of performance-contingent compensation, in monitoring firms, higher levels of uncertainty are associated with decreased use of performance-contingent compensation. These results support agency theory arguments that compensation structure is determined at least in part by concerns for economic efficiency.

Original languageEnglish (US)
Pages (from-to)159-167
Number of pages9
JournalAccounting and Business Research
Volume23
Issue number90
DOIs
StatePublished - Jan 1 1993

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Uncertainty
Monitoring
System design
Economic efficiency
Compensation structure
Agency theory
Managers
Compensation system
Perceived environmental uncertainty

ASJC Scopus subject areas

  • Accounting

Cite this

The Effect of Behaviour Monitoring and Uncertainty on the Use of Performance-Contingent Compensation. / Kren, Leslie; Kerr, Jeffrey.

In: Accounting and Business Research, Vol. 23, No. 90, 01.01.1993, p. 159-167.

Research output: Contribution to journalArticle

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