Performance Measurement in Agency Models

Chang Koo Chi and Kyoung Jin Choi ()
Additional contact information
Kyoung Jin Choi: University of Calgary, https://sites.google.com/site/kyoungjinchoiecon/

No 5/2019, Discussion Paper Series in Economics from Norwegian School of Economics, Department of Economics

Abstract: This note explores how to evaluate an agent’s performance in standard incentive contracts. We show that the MPS criterion proposed by Kim (1995) becomes a tight condition for one performance measurement system to be more informative than another, as long as the first-order approach can be justified. In the one-signal case obeying the monotone likelihood ratio property, the MPS criterion is equivalent to the way of ordering signals developed by Lehmann (1988), establishing a link to statistical decision theory. Our results demonstrate that depending on the agent’s potential deviations, ideal performance measures can be different.

Keywords: Agency problems; performance measurement; informativeness criterion; signal orderings (search for similar items in EconPapers)
JEL-codes: D86 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2019-02-25
New Economics Papers: this item is included in nep-hrm and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://brage.bibsys.no/xmlui/bitstream/item/198914/DP%2005.pdf?sequence=1 Full text (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hhs:nhheco:2019_005

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in Discussion Paper Series in Economics from Norwegian School of Economics, Department of Economics NHH, Department of Economics, Helleveien 30, N-5045 Bergen, Norway. Contact information at EDIRC.
Bibliographic data for series maintained by Synne Stormoen ().