Read the summary and the most important questions on Artikelen

• 2 Sticks and Carrots: the effect of contract frame on effort in incomplete settings

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• Penalty incentive contract

  Reduces monetary payouts if performance goals are not met

• What preference does an agent has according to the incentive contract and why?

  An agent prefers a bonus contract because he/she is loss aversive

• Social projection theory

  Individuals have a tendency to expect that others will behave similarly to themselves.

• 3 Application of the controllability principle and managerial performance

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• What are the motivational effects of the controllability principle?

  - Selection effect: join and remain in the company
  - Effort effect: increase or better allocate their effort

• What happens when you don't apply the controllability principle?

  It will decrease motivation and increase role stress, this could lead to dysfunctional behavior by individual managers.

• The hierarchical level of managers moderates the effects of the application of the principle on role stress, why is this only for lower and middle managers?

  This is more important for lower and middle managers, top managers seem to be better capable of coping effectively with the uncontrollable factors, because of managers' self-image, motivation and especially attitude towards risk vary with hierarchical level. Top level executives are constantly confronted with high uncertainty, implying that they are use to dealing and expect to be dealing with uncontrollable factors.

• 4 The impact of reputation and variance investigations on the creation of budget slack

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• When is budget slack the highest?

  When there is budget emphasis, target setters have private information and when there is participation in setting own budgets

• What kind of control is the policy of investigating budget variances

  A type of results control, because it holds managers responsible for explaining the cause of a particular outcome, a budget variance.

• Why will there be lower levels of budget slack, when budget reliability affects reputation?

  Budgets have implications that extend beyond the current period, managers' concern for their reputation is likely to influence budget decisions. If managers believe processing a favorable reputation will lead to future economic payoffs, they will take actions to bolster their reputation --> When budget reliability affects reputation, slack will be constrained as long as the value of reputation exceeds any short term benefits resulting from slack.

• Why will there be lower levels of budget slack, when large favorable variances might be investigated?

  When budget emphasis is high, budgets are important in evaluating manager's performance and results controls are more likely to exist. The possibility that significant favorable variances may be investigated will generate accountability pressure to reduce budget slack.