Document Type
Article
Publication Date
5-1-2003
Abstract
A variety of research (Wallace, 1997; Biddle, 1998; Glassman, 1999) shows the commonly held belief that management incentive systems influence the business decisions of company managers. However, given the wide-ranging business models in use today, as well as the changing economic conditions over time, it is entirely possible and likely that there will be differences in the effectiveness of incentive systems on company performance. More specifically, what is the role of incentive systems based on residual income (RI) in shaping business performance in companies operating in cyclic markets? Using quantitative research techniques, this study compares traditional and RI based incentive systems to the performance, (Market Value Added (MVA) and sales growth) of public companies operating in stable and cyclical market segments. The results of this research show that firms employing RI systems in a cyclical environment create less MVA than non-RI firms or those in stable environments. The results also show that high capital intensity has a negative effect on MVA, particularly in RI firms.
Keywords
management
Rights
© The Author(s). Kelvin Smith Library provides access for non-commercial, personal, or research use only. All other use, including but not limited to commercial or scholarly reproductions, redistribution, publication or transmission, whether by electronic means or otherwise, without prior written permission is strictly prohibited.
Department/Center
Design & Innovation
Recommended Citation
Milzcik, Gregory F., "The Role of Residual Income Management Systems (EVA) in Shaping the Outcome of Businesses in Cyclic Markets – Part 2 Quantitative Research" (2003). Student Scholarship. 484.
https://commons.case.edu/studentworks/484