Accounting decentralization and performance evaluation of business unit managers

Raffi J. Indjejikian, Michal Matejka

Research output: Contribution to journalArticle

24 Citations (Scopus)

Abstract

We use survey data to examine firms' propensity to rely on financial measures in evaluating local business unit managers. We find that firms rely less on financial measures (and more on nonfinancial measures or subjective evaluations) in determining local managers' bonuses when those managers have greater influence over the design of internal accounting systems. At the same time, we find no significant association between the choice of performance measures and local managers' authority to make operating decisions. Instead, we find that local authority to make operating decisions is positively associated with local managers' influence over accounting systems. Taken together, our findings suggest that the design of internal accounting systems is an important dimension of overall organizational design. Our findings also cast doubt on the maintained assumption in prior work that major organizational design choices are complementary.

Original languageEnglish (US)
Pages (from-to)261-290
Number of pages30
JournalAccounting Review
Volume87
Issue number1
DOIs
StatePublished - Jan 2012

Fingerprint

Performance evaluation
Managers
Decentralization
Accounting systems
Financial measures
Organizational design
Subjective evaluation
Performance measures
Authority
Non-financial measures
Bonuses
Local authorities
Propensity
Survey data

Keywords

  • Business unit controllers
  • Internal accounting systems
  • Performance measurement
  • Private information

ASJC Scopus subject areas

  • Finance
  • Accounting
  • Economics and Econometrics

Cite this

Accounting decentralization and performance evaluation of business unit managers. / Indjejikian, Raffi J.; Matejka, Michal.

In: Accounting Review, Vol. 87, No. 1, 01.2012, p. 261-290.

Research output: Contribution to journalArticle

@article{6a2bcc77eac74fe887d86d870e6d2ff9,
title = "Accounting decentralization and performance evaluation of business unit managers",
abstract = "We use survey data to examine firms' propensity to rely on financial measures in evaluating local business unit managers. We find that firms rely less on financial measures (and more on nonfinancial measures or subjective evaluations) in determining local managers' bonuses when those managers have greater influence over the design of internal accounting systems. At the same time, we find no significant association between the choice of performance measures and local managers' authority to make operating decisions. Instead, we find that local authority to make operating decisions is positively associated with local managers' influence over accounting systems. Taken together, our findings suggest that the design of internal accounting systems is an important dimension of overall organizational design. Our findings also cast doubt on the maintained assumption in prior work that major organizational design choices are complementary.",
keywords = "Business unit controllers, Internal accounting systems, Performance measurement, Private information",
author = "Indjejikian, {Raffi J.} and Michal Matejka",
year = "2012",
month = "1",
doi = "10.2308/accr-10168",
language = "English (US)",
volume = "87",
pages = "261--290",
journal = "Accounting Review",
issn = "0001-4826",
publisher = "American Accounting Association",
number = "1",

}

TY - JOUR

T1 - Accounting decentralization and performance evaluation of business unit managers

AU - Indjejikian, Raffi J.

AU - Matejka, Michal

PY - 2012/1

Y1 - 2012/1

N2 - We use survey data to examine firms' propensity to rely on financial measures in evaluating local business unit managers. We find that firms rely less on financial measures (and more on nonfinancial measures or subjective evaluations) in determining local managers' bonuses when those managers have greater influence over the design of internal accounting systems. At the same time, we find no significant association between the choice of performance measures and local managers' authority to make operating decisions. Instead, we find that local authority to make operating decisions is positively associated with local managers' influence over accounting systems. Taken together, our findings suggest that the design of internal accounting systems is an important dimension of overall organizational design. Our findings also cast doubt on the maintained assumption in prior work that major organizational design choices are complementary.

AB - We use survey data to examine firms' propensity to rely on financial measures in evaluating local business unit managers. We find that firms rely less on financial measures (and more on nonfinancial measures or subjective evaluations) in determining local managers' bonuses when those managers have greater influence over the design of internal accounting systems. At the same time, we find no significant association between the choice of performance measures and local managers' authority to make operating decisions. Instead, we find that local authority to make operating decisions is positively associated with local managers' influence over accounting systems. Taken together, our findings suggest that the design of internal accounting systems is an important dimension of overall organizational design. Our findings also cast doubt on the maintained assumption in prior work that major organizational design choices are complementary.

KW - Business unit controllers

KW - Internal accounting systems

KW - Performance measurement

KW - Private information

UR - http://www.scopus.com/inward/record.url?scp=84857274732&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=84857274732&partnerID=8YFLogxK

U2 - 10.2308/accr-10168

DO - 10.2308/accr-10168

M3 - Article

AN - SCOPUS:84857274732

VL - 87

SP - 261

EP - 290

JO - Accounting Review

JF - Accounting Review

SN - 0001-4826

IS - 1

ER -