Using current performance to set future targets can discourage effort and reduce performance. Our study examines whether this ratchet effect also undermines incentives of high-level managers and executives. We use a dynamic model to show that empirical tests used in prior literature can falsely...

Field experiments in firms are a valuable tool for gaining insights into the causal effects of management controls in complex, real-world environments. Not only do they enable researchers to examine the effect of management controls individually, but they also provide a means of understanding...