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4.3. SAMPLE AND MEASUREMENT 97 To increase the reliability of the instrument, the survey instrument was thoroughly pretested using Hak’s Three-Step Test Interview method (abbreviated: TSTI) (Hak et al. 2008). This method is an observational instrument for pretesting self-completion questionnaires 7 . TSTI works through observing actual instances of interaction between respondents and the instrument. Because this process mainly consists of cognitive processing and is therefore hidden from the observer, ‘thinking aloud’ is used as a technique for making the thought process observable (Hak et al. 2008). Through this process, TSTI helps to identify problems in questionnaires, often leading to modification of the instrument. Three rounds of pre-tests with twelve managers 8 ensured a thorough and correct understanding of the questions and response categories. 4.3.3 Measurement This section describes the measurement of the variables used for this study. First, I discuss the measurement of the dependent and independent variables (which include room for managerial opportunism, RPE use, and the antecedents to opportunism (i.e., information asymmetry, goal ambiguity, measurability of outputs), and decentralization of decision rights). This section concludes with a description of the measurement of the control variables for size and sector. When this study refers to the questionnaire items, please see the appendix at the end of the thesis for the exact phrasing, the response categories, and, if applicable, the sources. The Room for Managerial Opportunism Many prior studies and reviews have discussed the tendency of agents to act opportunistically (see, for example, Williamson 1985, Eisenhardt 1989, Speklé 2001, and Macher & Richman 2008). However, because the accounting & control literature generally does not empirically assess opportunism (Macher & Richman 2008), no measures of opportunism were readily available 9 . Without applicable measures available from prior studies, the variable room for managerial opportunism is originally developed for this study. The dependent variable Room for Managerial Opportunism (abbreviated: RFMO) is based on a series of four questions that ask the respondent to indicate the extent to which he can behave opportunistically under his current control system. The items and their mutual relations are summarized in table 4.2. Using these 7 Although the survey was not a self-completion questionnaire in the sense that the respondents did not fill out the survey by themselves, but together with the interviewing student, I still value the contribution of TSTI. Filling out the survey was outside of the direct sphere of influence of the researcher, but was carried out by -carefully briefed- students. 8 The pre-test participants’ organizations show great diversity, ranging from production to consulting, educational and financial services, and from very large to smaller business units, including both for-profit and not-for-profit organizations. 9 Studies from other fields that measure opportunism (most of which study mainly manufacturer and distributor exchange relationships in a channel setting) do not provide useful measures for this research (see, for example, John 1984, Dwyer & Oh 1987, and Gundlach et al. 1995).
98 CHAPTER 4. OPPORTUNISM MITIGATION EFFECTIVENESS items, I proxy for the extent to which the manager can behave opportunistically if he wanted to instead of whether he actually behaves opportunistically. This distinction is important because the room that the Management Control System leaves for potential opportunism indicates the quality of control. Table 4.2: Items for Room for Managerial Opportunism (Q39) Item description Component loadings a. Possibility to hide bad performance 0.848 b. Possibility for shirking 0.816 c. Possibility for window dressing 0.806 d. Possibility to adopt pet projects 0.713 Percentage variance explained 63.6% Cronbach’s alpha 0.805 The questions for RFMO refer to the room for both active and passive forms of opportunism and include measures of misleading and lying behaviours. These behaviours include consciously providing effort that is not congruent with the firm’s goals and committing fraud with accounting figures. RPE potentially restrains both forms of opportunism. Comparing a manager’s performance with the performance of a peer group provides the manager’s superior with information about the quality of the manager’s reported performance. This information reduces the manager’s ability to hide bad performance by using, for example, excuses about the market conditions under which the performance was realized. Moreover, unfavourable peer comparisons may indicate goal-incongruent behaviour, such as the adoption of a pet project. In contrast, a noticeably favourable comparison with peer performance that is not supported by a convincing explanation may lead the superior to detect, for example, fraud committed with accounting figures committed by the manager to increase his compensation. Statistically, the individual questions combine into one factor. The four questions produce a single factor with adequate scale reliability. RFMO is calculated by averaging the scores on all of the items. The mean score on RFMO is 2.64 (St.Dev. 1.21) on a 7-point Likert-scale, which suggests that, on average, the respondents have limited room to behave opportunistically under their installed control systems. RPE use(*) The RPE use measure (labelled ‘RPE-Use’) asks about the extent to which peer performance functions as a point of reference for evaluating the quality of the agent’s performance (Q1). The underlying questionnaire items focus on the ex-post nature of performance evaluation. This measure comprises both explicit coupling of the performance target to peer performance and more implicit applications of RPE. Implicit applications
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Relative Performance Evaluation in
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NYENRODE BUSINESS UNIVERSITEIT Rela
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Table of Contents Preface 1 General
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Preface Why do people make things h
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2 CHAPTER 1. GENERAL INTRODUCTION I
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10 CHAPTER 1. GENERAL INTRODUCTION
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Chapter 2 The Use of Relative Perfo
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2.1. INTRODUCTION 15 is not a promi
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2.2. THEORETICAL BACKGROUND 17 The
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2.2. THEORETICAL BACKGROUND 19 Sinc
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2.2. THEORETICAL BACKGROUND 21 who
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2.2. THEORETICAL BACKGROUND 23 suff
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2.3. SAMPLE AND MEASUREMENT 25 2.2.
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2.3. SAMPLE AND MEASUREMENT 27 2.3.
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2.3. SAMPLE AND MEASUREMENT 35 Emph
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2.4. ANALYSES 37 2.4 Analyses This
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2.4. ANALYSES 39 Table 2.8: RPE use
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2.4. ANALYSES 41 2.4.2 Correlations
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2.4. ANALYSES 43 Concerning the con
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2.4. ANALYSES 45 Table 2.13: Result
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Page 72 and 73: 3.2. DEVELOPMENT OF THE MODEL 63 3.
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Page 88 and 89: 3.4. ANALYSES 79 Table 3.10: Result
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Page 92 and 93: 3.4. ANALYSES 83 Larcker & Rusticus
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Page 138 and 139: Appendix Overview of Questionnaire
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Page 142 and 143: Q14 When serving your clients, how
Page 144 and 145: Q23 Please indicate whether you agr
Page 146 and 147: Noise Q34 NOISE (primary measure) P
Page 148 and 149: References 1. Abernethy, M.A., Bouw
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148 beïnvloeden, veroorzaken ruis
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Biography Hilco van Elten (1979) ho
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