This study explores the effect of financial managers’ organizational identity (OI) on improving financial performance under fixed salary contracts and balanced budget restrictions in Japanese local governments (LGs). LGs enter compensation contracts based on fixed salaries with financial...

This study adopts behavioral contract theory through a mathematical model and clarifies the situation in which a fixed–salary contract is preferable to incentives–based one for the principal. Theoretically, the expected utility for the principal is higher under an incentives–based contract...