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Efficient Manipulation in a Repeated Setting

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  • JOEL S. DEMSKI
  • HANS FRIMOR
  • DAVID E. M. SAPPINGTON

Abstract

We analyze the optimal behavior of an organization when its employees can manipulate the organization's accounting system to their private advantage. We find that the organization may benefit by helping its employees manipulate the system. This help can reduce the employees' private returns from devoting effort to further manipulation of the accounting system, which reduces the cost of motivating the employees to devote their effort to improving the real (rather than the measured) performance of the organization.

Suggested Citation

  • Joel S. Demski & Hans Frimor & David E. M. Sappington, 2004. "Efficient Manipulation in a Repeated Setting," Journal of Accounting Research, Wiley Blackwell, vol. 42(1), pages 31-49, March.
    • Handle: RePEc:bla:joares:v:42:y:2004:i:1:p:31-49
    DOI: 10.1111/j.1475-679X.2004.00128.x
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    References listed on IDEAS

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    Cited by:

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    2. François Larmande & Jean-Pierre Ponssard, 2013. "Fishing for excuses and performance evaluation," Working Papers hal-00825297, HAL.
    3. De Waegenaere, A.M.B. & Wielhouwer, J.L., 2008. "On the Effects of the Degree of Discretion in Reporting Managerial performance," Other publications TiSEM 7251fe36-f257-46bc-8185-d, Tilburg University, School of Economics and Management.
    4. De Waegenaere, A.M.B. & Wielhouwer, J.L., 2008. "On the Effects of the Degree of Discretion in Reporting Managerial performance," Discussion Paper 2008-21, Tilburg University, Center for Economic Research.
    5. Chia-Feng (Jeffrey) Yu, 2017. "Interactive Reporting Bias Surrounding CEO Turnover," European Accounting Review, Taylor & Francis Journals, vol. 26(2), pages 239-282, April.
    6. Min Chen & Varghese S. Jacob & Suresh Radhakrishnan & Young U. Ryu, 2015. "Can Payment-per-Click Induce Improvements in Click Fraud Identification Technologies?," Information Systems Research, INFORMS, vol. 26(4), pages 754-772, December.
    7. Gibbs, Michael & Merchant, Kenneth A. & Van der Stede, Wim A. & Vargus, Mark A., 2004. "Performance Measure Properties and Incentives," IZA Discussion Papers 1356, Institute of Labor Economics (IZA).
    8. Joseph B. Omonuk & Jean Baptiste Koffi Dodor, 2016. "Do US electric utilities use industry-specific generally accepted accounting principles to manage earnings?," International Journal of Economics and Accounting, Inderscience Enterprises Ltd, vol. 7(2), pages 101-115.
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