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An empirical study of the effects of incongruence within a firm's financial planning and control system on managers' project selections

Ruhl, Jack Michael
http://rave.ohiolink.edu/etdc/view?acc_num=case1055339828

Abstract Details

1991, Doctor of Philosophy, Case Western Reserve University, Accounting.
This research focused on the effects of an incongruence between two elements of a firm's financial planning and control (PC) system on managers' project selection decisions. Specifically, the effects of an incongruence between the firm's goals and the firm's management compensation system were studied. Two different goals were examined here: earnings maximization and shareholder value creation. Compensation systems may be congruent with (that is, support the achievement of) either of these goals. An experiment was conducted using currently enrolled executive master of business administration (EMBA) students and alumni of the EMBA program as respondents. Half of the respondents made project selection decisions for an hypothetical firm with a compensation system which was congruent with the firm's goals. The other respondents made project selection decisions for an hypothetical firm with a compensation system which was incongruent with the firm's goals. The dependent variables were (1) respondents' project selection decisions and (2) the perceived importance of various financial information items in making the decisions. Analysis of variance (ANOVA) results provided evidence that the firm's compensation system strongly affected project selection decisions, while the firm's goals had a minimal effect on project selection decisions. No interaction effect was apparent. This suggests that different parts of the PC system have unequal effects on managers' project selection decisions. Further, interactions among the parts of the PC system may not be assumed in all cases. Multivariate analysis of variance (MANOVA) results provided evidence that the firm's compensation system and the firm's goals affect the perceived importance of traditional accrual accounting information items, but not the perceived importance of information about the amounts and timing of cash flows and the cost of capital. This may be explained by managers' familiarity with accrual accounting concepts, but ignorance of the importance of cash flows and the firm's cost of capital.
David Campbell (Advisor)
214 p.
Business Administration, Accounting
incongruencef; inancial planningc; ontrol system; project selections

Recommended Citations

Citations

  • Ruhl, J. M. (1991). An empirical study of the effects of incongruence within a firm's financial planning and control system on managers' project selections [Doctoral dissertation, Case Western Reserve University]. OhioLINK Electronic Theses and Dissertations Center. http://rave.ohiolink.edu/etdc/view?acc_num=case1055339828

    APA Style (7th edition)

  • Ruhl, Jack. An empirical study of the effects of incongruence within a firm's financial planning and control system on managers' project selections. 1991. Case Western Reserve University, Doctoral dissertation. OhioLINK Electronic Theses and Dissertations Center, http://rave.ohiolink.edu/etdc/view?acc_num=case1055339828.

    MLA Style (8th edition)

  • Ruhl, Jack. "An empirical study of the effects of incongruence within a firm's financial planning and control system on managers' project selections." Doctoral dissertation, Case Western Reserve University, 1991. http://rave.ohiolink.edu/etdc/view?acc_num=case1055339828

    Chicago Manual of Style (17th edition)

case1055339828
901
© 1991, all rights reserved.
This open access ETD is published by Case Western Reserve University School of Graduate Studies and OhioLINK.