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Decision Rights (decision + right)

Distribution by Scientific Domains
Business, Economics, Finance and Accounting100%

Selected Abstracts

Private Predecision Information, Performance Measure Congruity, and the Value of Delegation,

CONTEMPORARY ACCOUNTING RESEARCH, Issue 4 2000
ROBERT M. BUSHMAN
Abstract We use a linear contracting framework to study how the relation between performance measures used in an agent's incentive contract and the agent's private predecision information affects the value of delegating decision rights to the agent. The analysis relies on the idea that available performance measures are often imperfect representations of the economic consequences of managerial actions and decisions, and this, along with gaming possibilities provided to the agent by access to private predecision information, may overwhelm any benefits associated with delegation. Our analytical framework allows us to derive intuitive conditions under which delegation does and does not have value, and to provide new insights into the linkage between imperfections in performance measurement and agency costs. [source]

Oversight and Delegation in Corporate Governance: deciding what the board should decide

CORPORATE GOVERNANCE, Issue 1 2006
Michael Useem
American boards of directors increasingly treat their delegation of authority to management as a careful and self-conscious decision. Numerically dominated by non-executives, boards recognize that they cannot run the company, and many are now seeking to provide stronger oversight of the company without crossing the line into management. Based on interviews with informants at 31 major companies, we find that annual calendars and written protocols are often used to allocate decision rights between the board and management. Written protocols vary widely, ranging from detailed and comprehensive to skeletal and limited in scope. While useful, such calendars and protocols do not negate the need for executives to make frequent judgement calls on what issues should go to the board and what should remain within management. Executives still set much of the board's decision-making agenda, and despite increasingly asserting their sovereignty in recent years, directors remain substantially dependent upon the executives' judgement on what should come to the board. At the same time, a norm is emerging among directors and executives that the latter must be mindful of what directors want to hear and believe they should decide. [source]

Preliminary evidence on the appointment of institutional solutions to franchisor moral hazard,the case of franchisee councils,

MANAGERIAL AND DECISION ECONOMICS, Issue 1 2007
Olivier Cochet
Besides franchisee opportunistic behavior, franchisor moral hazard is a central concern in franchise chains. Economic literature thus far focused on the sharing of franchisee revenues as an incentive for curbing franchisor malfeasance. In this paper, we ask whether and how the obligations of chains may be enforced through institutional arrangements like franchisee councils. Consistent with expectations, the appointment of a council empirically turned out to be more likely as decision rights,a proxy for the scope of moral hazard,were increasingly allocated to companies' management. We found this relationship to be negatively moderated by the contractual share parameter. Copyright © 2007 John Wiley & Sons, Ltd. [source]

Structuring residual income and decision rights under internal governance: results from the Hungarian trucking industry

MANAGERIAL AND DECISION ECONOMICS, Issue 5 2005
Josef Windsperger
The paper offers a property rights and monitoring cost explanation for the allocation of residual income and decision rights between the carriers and truck drivers under internal governance. First, by applying the property rights theory, we argue that the structure of residual income rights depends on the importance of noncontractible (intangible) assets of the truck driver to generate residual surplus. The more important the truck driver's intangible knowledge assets, the more residual income rights should be transferred to him. Second, we controlled for the monitoring costs as an additional explanatory variable of the allocation of residual income rights. According to agency theory, the variable proportion of the driver's income should be higher where monitoring costs are higher. Third, we investigate the relationship between residual income and residual decision rights under internal governance. If the contractual relation is governed by an employment contract, residual decision and residual income rights may be substitutes because, under fiat, a certain incentive effect of the governance structure may result either from the allocation of high-powered incentives or the transfer of residual decision rights to the driver. These hypotheses were tested by using data from the Hungarian trucking industry. The data provide partial support for the hypotheses. Copyright © 2005 John Wiley & Sons, Ltd. [source]

Top executive turnovers: Separating decision and control rights

MANAGERIAL AND DECISION ECONOMICS, Issue 1 2005
Robert Neumann
This paper examines the relationship between performance and top executive turnovers using a sample of 81 turnovers and matching companies listed on the Copenhagen Stock Exchange. We find that poor market performance increases the probability of management replacements and that forced layoffs are value-increasing events while voluntary resignations are value-decreasing events. Large shareholders as active monitors, or part of corporate control, are not exhibited in the results. If large shareholders have any influence on CEO turnovers it is not revealed in our data. Indeed, separating control rights from decision rights does not appear to affect managerial turnovers. Copyright © 2004 John Wiley & Sons, Ltd. [source]