Observability and Subjective Performance Measurement

Neale Gilbert O'CONNOR, F. Johnny Deng, Pan Fei

    Research output: Contribution to journalJournal articlepeer-review

    4 Citations (Scopus)


    Accounting research provides theory and evidence on the choice and use of subjective performance measures for evaluating managerial performance. However, accounting research does not focus on the subjective performance measurement of managerial behaviour once measures have been chosen. We extend accounting research by investigating the factors that influence the subjective performance measurement decision. We predict that the level of subjective performance measurement is influenced by the informativeness of financial performance measures and by the verifiability of the nonfinancial measures in a formula-based incentive plan. We expect that the measures' informativeness and verifiability depends on the observability of both the managerial behaviour being subjectively measured and the reliability of the financial and nonfinancial performance measures. More specifically, we hypothesize that the influence of the levels of the financial performance measures on the level of subjective performance measurement is moderated by the observability of either the managerial behaviour being measured (for the financial measures) or the performance measures' reliability (for the nonfinancial measures). Data from a firm provide support for our hypotheses.

    Original languageEnglish
    Pages (from-to)208-237
    Number of pages30
    Issue number2
    Publication statusPublished - 1 Jun 2015

    Scopus Subject Areas

    • Accounting

    User-Defined Keywords

    • Nonfinancial performance measures
    • Observability
    • Performance measurement
    • Performance measures
    • Subjective performance measurement


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