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| Author(s): |
Andson Braga de Aguiar
Total Authors: 1
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| Document type: | Doctoral Thesis |
| Press: | São Paulo. |
| Institution: | Universidade de São Paulo (USP). Faculdade de Economia, Administração e Contabilidade (FEA/SBD) |
| Defense date: | 2009-07-29 |
| Examining board members: |
Fabio Frezatti;
Lindolfo Galvao de Albuquerque;
André Carlos Busanelli de Aquino;
Diogenes de Souza Bido;
Frank Gerard Hans Hartmann
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| Advisor: | Fabio Frezatti |
| Abstract | |
This study investigates the effect of elements of the incentive system on managerial time orientation (MTO). It examines the direct and interactive effects of the type of performance indicators, the evaluation period and reward timing, based on a cognitive approach that combines elements from accounting, economics and psychology literature. It also evaluates the moderating effect of strategy, propensity to leave and environmental uncertainty in the relationship between these three elements of the incentive system and MTO. This study argues that to obtain broader understanding of the impact of the elements of the incentive system on MTO, not only the isolated effects of each of these three elements must be considered, but also the way they interact to produce their effects. MTO is reflected by a set of dimensions that indicate the time horizon between effort allocation and reward timing, within which managers seek to optimize financial incentives. The hypotheses regarding the direct effects of the three elements of the incentive system predict that the more these elements reflect long-term financial effects, whether through greater relative importance attributed to non-financial performance indicators, a longer evaluation period, or a longer time lag for receiving compensation, the longer the managers time orientation will be. The hypotheses also predict three interactive effects between these elements of the managerial incentive system: the first suggests that the evaluation period affects the relationship between the relative importance of the performance measure and MTO; the second predicts that reward timing affects the relationship between the evaluation period and MTO; and the last one indicates that reward timing affects the relationship between the relative importance of the performance indicator, the evaluation period and MTO, in a threeway interaction. To evaluate these hypotheses, individual level data was collected in a survey. In order to analyze the data, Partial Least Squares estimates were used, as well as additional methods that explore the interactions predicted in this study. The results indicated that, contrary to the expectations generally found in accounting literature and to the hypothesis formulated in this study, greater relative importance attributed to nonfinancial performance indicators affected MTO negatively. These results also indicated that rather than having an isolated effect on MTO, the effects of the evaluation period and reward timing occur interactively, although this interactive effect did not occur in the way this study predicted. The study did not identify interactive effects between the relative importance of performance indicators and the evaluation period or between the three elements of the incentive system. Additionally, the results indicated that strategy moderates the effect on MTO produced both by the evaluation period and by reward timing. The two main implications of this research are as follows: on the one hand, the types of performance indicators can lead to invalid conclusions about their effects on MTO, and on the other hand, a longer time orientation can be obtained by a managerial incentive plan that simultaneously includes a longer evaluation period and a longer time lag for receiving compensation. In the conclusion of this study, these results are discussed, the limitations of this research are presented and opportunities for future research are suggested. (AU) | |
| FAPESP's process: | 06/06149-2 - Effect of reward system on managers' time orientation |
| Grantee: | Andson Braga de Aguiar |
| Support Opportunities: | Scholarships in Brazil - Doctorate |