Details
| Original language | English |
|---|---|
| Pages (from-to) | 2832-2870 |
| Number of pages | 39 |
| Journal | Review of accounting studies |
| Volume | 29 |
| Issue number | 3 |
| Early online date | 2 Jun 2023 |
| Publication status | Published - Sept 2024 |
Abstract
Should employers disclose their assessments of their employees? Popular managerial advice suggests that telling employees that they are assessed to have high potential leads to greater effort and engagement, boosting firm profits. However, some employers still choose to withhold employee assessments. What explains this paradoxical observation? We show that disclosing a positive assessment to an employee increases his incentive to appear successful. Success can be achieved by working hard or by misreporting. If the internal controls are sufficiently weak, the employee excessively substitutes misreporting for effort, thereby decreasing firm profits. Consequently, our model predicts that employers withhold assessments when internal controls are weak. Other predictions are that, all else equal, employers with an experienced human resources (HR) function will be more likely to disclose assessments, and employers who hire from “prestigious” target schools will be less likely to disclose assessments.
Keywords
- D21, D23, D82, D86, Internal controls, J24, J53, Misreporting, Potential assessment, Talent management
ASJC Scopus subject areas
- Business, Management and Accounting(all)
- Accounting
- Business, Management and Accounting(all)
- General Business,Management and Accounting
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In: Review of accounting studies, Vol. 29, No. 3, 09.2024, p. 2832-2870.
Research output: Contribution to journal › Article › Research › peer review
}
TY - JOUR
T1 - To tell or not to tell
T2 - the incentive effects of disclosing employer assessments
AU - Lilge, Alexandra
AU - Ramchandani, Abhishek
N1 - Publisher Copyright: © The Author(s), under exclusive licence to Springer Science+Business Media, LLC, part of Springer Nature 2023.
PY - 2024/9
Y1 - 2024/9
N2 - Should employers disclose their assessments of their employees? Popular managerial advice suggests that telling employees that they are assessed to have high potential leads to greater effort and engagement, boosting firm profits. However, some employers still choose to withhold employee assessments. What explains this paradoxical observation? We show that disclosing a positive assessment to an employee increases his incentive to appear successful. Success can be achieved by working hard or by misreporting. If the internal controls are sufficiently weak, the employee excessively substitutes misreporting for effort, thereby decreasing firm profits. Consequently, our model predicts that employers withhold assessments when internal controls are weak. Other predictions are that, all else equal, employers with an experienced human resources (HR) function will be more likely to disclose assessments, and employers who hire from “prestigious” target schools will be less likely to disclose assessments.
AB - Should employers disclose their assessments of their employees? Popular managerial advice suggests that telling employees that they are assessed to have high potential leads to greater effort and engagement, boosting firm profits. However, some employers still choose to withhold employee assessments. What explains this paradoxical observation? We show that disclosing a positive assessment to an employee increases his incentive to appear successful. Success can be achieved by working hard or by misreporting. If the internal controls are sufficiently weak, the employee excessively substitutes misreporting for effort, thereby decreasing firm profits. Consequently, our model predicts that employers withhold assessments when internal controls are weak. Other predictions are that, all else equal, employers with an experienced human resources (HR) function will be more likely to disclose assessments, and employers who hire from “prestigious” target schools will be less likely to disclose assessments.
KW - D21
KW - D23
KW - D82
KW - D86
KW - Internal controls
KW - J24
KW - J53
KW - Misreporting
KW - Potential assessment
KW - Talent management
UR - http://www.scopus.com/inward/record.url?scp=85160845682&partnerID=8YFLogxK
U2 - 10.1007/s11142-023-09769-6
DO - 10.1007/s11142-023-09769-6
M3 - Article
AN - SCOPUS:85160845682
VL - 29
SP - 2832
EP - 2870
JO - Review of accounting studies
JF - Review of accounting studies
SN - 1380-6653
IS - 3
ER -