A field study of the impact of a performance-based incentive plan

Much management accounting research focuses on design of incentive compensation contracts. A basic assumption in these contracts is that performance-based incentives improve employee performance. This paper reports on a field test of the multi-period incentive effects of a performance-based compensation plan on the sales of a retail establishment. Analysis of panel data for 34 retail outlets over 66 months indicates a sales increase when the plan is implemented an effect that persists over time. Sales gains however are significantly lower in the peak selling season when more temporary workers are employed.

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