IDEAS home Printed from https://ideas.repec.org/a/taf/euract/v13y2004i4p643-657.html
   My bibliography  Save this article

Intertemporal aggregation and incentives

Author

Listed:
  • Anil Arya
  • Jonathan Glover
  • Pierre Jinghong Liang

Abstract

Intertemporal aggregation results in a summarization of information and a natural delay in the release of information. We study a principal-agent model and show that intertemporal aggregation can be an optimal feature of a performance evaluation system. We then highlight subtleties associated with valuing additional information as the level of aggregation of existing information is varied.

Suggested Citation

  • Anil Arya & Jonathan Glover & Pierre Jinghong Liang, 2004. "Intertemporal aggregation and incentives," European Accounting Review, Taylor & Francis Journals, vol. 13(4), pages 643-657.
    • Handle: RePEc:taf:euract:v:13:y:2004:i:4:p:643-657
    DOI: 10.1080/0963818042000216857
    as

    Download full text from publisher

    File URL: http://www.tandfonline.com/doi/abs/10.1080/0963818042000216857
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/0963818042000216857?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Bengt Holmstrom, 1979. "Moral Hazard and Observability," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 74-91, Spring.
    2. Arya, Anil & Young, Richard A. & Fellingham, John C., 1993. "Preference representation and randomization in principal-agent contracts," Economics Letters, Elsevier, vol. 42(1), pages 25-30.
    3. Peter Ove Christensen & Joel S. Demski & Hans Frimor, 2002. "Accounting Policies in Agencies with Moral Hazard and Renegotiation," Journal of Accounting Research, Wiley Blackwell, vol. 40(4), pages 1071-1090, September.
    4. Gigler, F & Hemmer, T, 1998. "On the frequency, quality, and informational role of mandatory financial reports," Journal of Accounting Research, Wiley Blackwell, vol. 36, pages 117-147.
    5. Joel S. Demski, 1985. "Accounting research: 1985," Contemporary Accounting Research, John Wiley & Sons, vol. 2(1), pages 69-75, September.
    6. Lim, S.S. & Sunder, S., 1990. "Econometric Efficiency Of Asset Valuation Rules Under Price Movement And Measurement Errors," GSIA Working Papers 89-90-40, Carnegie Mellon University, Tepper School of Business.
    7. Fellingham, John C. & Newman, D. Paul & Suh, Yoon S., 1985. "Contracts without memory in multiperiod agency models," Journal of Economic Theory, Elsevier, vol. 37(2), pages 340-355, December.
    8. Amin H. Amershi & Joel S. Demski & John Fellingham, 1985. "Sequential Bayesian Analysis in accounting settings," Contemporary Accounting Research, John Wiley & Sons, vol. 1(2), pages 176-192, March.
    9. Grossman, Sanford J & Hart, Oliver D, 1983. "An Analysis of the Principal-Agent Problem," Econometrica, Econometric Society, vol. 51(1), pages 7-45, January.
    10. Anil Arya & Jonathan Glover & K. Sivaramakrishnan., "undated". "The Interaction between Decision and Control Problems and the Value of Information," Corporate Finance & Organizations _016, Ohio State University.
    11. Jacques Crémer, 1995. "Arm's Length Relationships," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 110(2), pages 275-295.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Christian Hopp & Christian Lukas, 2014. "Evaluation frequency and evaluator’s experience: the case of venture capital investment firms and monitoring intensity in stage financing," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 18(2), pages 649-674, May.
    2. Alfred Wagenhofer, 2014. "Trading off Costs and Benefits of Frequent Financial Reporting," Journal of Accounting Research, Wiley Blackwell, vol. 52(2), pages 389-401, May.
    3. Nikias, Anthony D. & Schwartz, Steven T. & Young, Richard A., 2009. "A note on bundling budgets to achieve management control," Journal of Accounting Education, Elsevier, vol. 27(3), pages 168-184.
    4. Anil Arya & Brian Mittendorf, 2011. "The Benefits of Aggregate Performance Metrics in the Presence of Career Concerns," Management Science, INFORMS, vol. 57(8), pages 1424-1437, August.
    5. Christian Lukas, 2023. "On interim performance evaluations and interdependent period outcomes," Journal of Management Control: Zeitschrift für Planung und Unternehmenssteuerung, Springer, vol. 34(1), pages 67-108, March.
    6. D. Eric Hirst & Lisa Koonce & Shankar Venkataraman, 2007. "How Disaggregation Enhances the Credibility of Management Earnings Forecasts," Journal of Accounting Research, Wiley Blackwell, vol. 45(4), pages 811-837, September.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Arya, Anil & Fellingham, John & Glover, Jonathan, 1997. "Teams, repeated tasks, and implicit incentives," Journal of Accounting and Economics, Elsevier, vol. 23(1), pages 7-30, May.
    2. Frank B. Gigler & Thomas Hemmer, 2004. "On the Value of Transparency in Agencies with Renegotiation," Journal of Accounting Research, Wiley Blackwell, vol. 42(5), pages 871-893, December.
    3. Conning, Jonathan & Udry, Christopher, 2007. "Rural Financial Markets in Developing Countries," Handbook of Agricultural Economics, in: Robert Evenson & Prabhu Pingali (ed.), Handbook of Agricultural Economics, edition 1, volume 3, chapter 56, pages 2857-2908, Elsevier.
    4. Pierre Jinghong Liang, 2000. "Accounting Recognition, Moral Hazard, and Communication," Contemporary Accounting Research, John Wiley & Sons, vol. 17(3), pages 458-490, September.
    5. Lambert, Richard A., 2001. "Contracting theory and accounting," Journal of Accounting and Economics, Elsevier, vol. 32(1-3), pages 3-87, December.
    6. Michael Fung, 2013. "A trade-off between non-fundamental risk and incentives," Review of Quantitative Finance and Accounting, Springer, vol. 41(1), pages 29-51, July.
    7. Brigitte Godbillon-Camus, 2003. "Subjective evaluation, ambiguity and relational contracts," Working Papers of LaRGE Research Center 2003-03, Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg.
    8. Haijin Lin, 2006. "Accounting Discretion and Managerial Conservatism: An Intertemporal Analysis," Contemporary Accounting Research, John Wiley & Sons, vol. 23(4), pages 1017-1041, December.
    9. Versano, Tsahi, 2021. "Silence can be golden: On the value of allowing managers to keep silent when information is soft," Journal of Accounting and Economics, Elsevier, vol. 71(2).
    10. Ramji Balakrishnan, 1990. "The role of budgets and variances in repeated investment decisions," Contemporary Accounting Research, John Wiley & Sons, vol. 7(1), pages 105-122, September.
    11. Hugo Hopenhayn & Arantxa Jarque, 2006. "Moral Hazard and Persistence," 2006 Meeting Papers 670, Society for Economic Dynamics.
    12. Calcagno, R. & Renneboog, L.D.R., 2004. "Capital Structure and Managerial Compensation : The Effects of Renumeration Seniority," Discussion Paper 2004-120, Tilburg University, Center for Economic Research.
    13. Goergen, Marc & Manjon, Miguel C. & Renneboog, Luc, 2008. "Recent developments in German corporate governance," International Review of Law and Economics, Elsevier, vol. 28(3), pages 175-193, September.
    14. Atasi Basu & Randal Elder & Mohamed Onsi, 2012. "Reported earnings, auditor's opinion, and compensation: theory and evidence," Accounting and Business Research, Taylor & Francis Journals, vol. 42(1), pages 29-48, March.
    15. Sebastian Koehne & Nicola Pavoni & Arpad Abraham, 2011. "Optimal Income Taxation with Asset Accumulation," 2011 Meeting Papers 1161, Society for Economic Dynamics.
    16. Rafal M. Wojakowski & M. Shahid Ebrahim & Aziz Jaafar & Murizah Osman Salleh, 2019. "Can Loan Valuation Adjustment (LVA) approach immunize collateralized debt from defaults?," Financial Markets, Institutions & Instruments, John Wiley & Sons, vol. 28(2), pages 141-158, May.
    17. Nafziger, Julia, 2009. "Timing of information in agency problems with hidden actions," Journal of Mathematical Economics, Elsevier, vol. 45(11), pages 751-766, December.
    18. R. Glenn Hubbard & Darius Palia, 1995. "Benefits of Control, Managerial Ownership, and the Stock Returns of Acquiring Firms," RAND Journal of Economics, The RAND Corporation, vol. 26(4), pages 782-793, Winter.
    19. Canice Prendergast, 2000. "The Tenuous Tradeoff Between Risk and Incentives," NBER Working Papers 7815, National Bureau of Economic Research, Inc.
    20. de la Rosa, Leonidas Enrique, 2011. "Overconfidence and moral hazard," Games and Economic Behavior, Elsevier, vol. 73(2), pages 429-451.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:euract:v:13:y:2004:i:4:p:643-657. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/REAR20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.