Managerial incentive plans often combine objective measures of performance relative to beginning-of-year targets with ex post subjective evaluations. We argue that one of the roles of subjectivity is to offset the limitations of target-based rewards and strengthen managerial incentives when...

Recent studies have shown that the congruence (i.e. value relevance) of accounting earnings-based measures of performance (e.g., earnings, residual income) has been declining significantly over an extended period of time. We confirm this prior finding, and examine the implications of poor...