The effect of performance evaluation schemes on predicted transfer prices: Do leadership tone and perceived fairness concerns matter?
Abstract
This paper experimentally investigates two control mechanisms that firms can use to avoid negotiation conflicts in negotiated transfer pricing decisions: leadership tone and performance evaluation schemes. When division managers are evaluated using a competitive performance evaluation scheme, a supportive leadership tone leads to a higher likelihood that divisions will settle on a transfer price close to the equal-profit transfer price. In contrast, when division managers are evaluated using a cooperative performance evaluation scheme, leadership tone does not significantly affect the likelihood that divisions settle on an equal-profit transfer price. These results demonstrate that firms, maintaining individual performance evaluations in a decentralized company structure, can use an informal control such as leadership tone to manage negotiation conflicts.
Stijn Masschelein
Senior Lecturer in Accounting and Finance - Fellow in Center of Data Business Analytics
I am a lecturer in accounting at the University of Western Australia. I am interested in the role of (management accounting) information in decision making and risk taking. My research investigate how verifiable and subjective information supports formal and informal contracts. My interest is easily piqued and as a result I am involved in a wide variety of projects such as field applications in target setting and cost of quality, lab experiments on negotiations, markets, and risk taking, survey research on integrity and quantitative field studies in the banking sector. I developed experience in a range of statistical methods such as meta-analysis, (Bayesian) multilevel models, and simulations.