Graduation Year
2024
Document Type
Dissertation
Degree
Ph.D.
Degree Name
Doctor of Philosophy (Ph.D.)
Degree Granting Department
Business Administration
Major Professor
Uday Murthy, Ph.D.
Committee Member
Kristina Demek, Ph.D.
Committee Member
Carlos J. Angueira, Ph.D.
Committee Member
Joseph Vandello, Ph.D.
Keywords
Subjective Performance Measures, Objective Performance Measures, Employer Moral Hazard, Accountability, Performance Evaluations, Budget-Based Incentives
Abstract
Although organizations may use multiple types of performance measures when evaluating employee performance, such as objective and subjective measures, performance measure subjectivity can introduce unverifiable information on the employee side, giving rise to employer opportunistic behavior. Employers may use the unverifiable information within subjective performance measures to increase their own personal compensation by undercompensating evaluated employees, creating a control problem known as employer moral hazard. With a 2x2 multi-period experiment, this study investigates the effect employer moral hazard has on the allocation of employee bonus compensation when there are differing levels of objective and subjective performance measures and a requirement or no requirement to justify performance evaluation decisions to employees. Results of repeated measures ANOVA tests for the main hypothesis reveal that neither the performance measure type nor justification requirement manipulations have a significant effect on employee bonus compensation. Additional univariate, repeated measures, and mediation analyses reveal that when employer budget-based compensation incentives are present employees evaluated using mostly subjective performance measures receive less bonus compensation compared to employees evaluated using mostly objective performance measures due to perceptions of accountability to the evaluated employee being lower. Additional analyses also reveal employee undercompensation is reversed after the introduction of a justification requirement, as employers feel more accountable to evaluated employees and exert more effort in the justification to make performance evaluation decisions that are justifiable to the evaluated employees. These findings are consistent with the manifestation of employer moral hazard and the subsequent mitigation of employer moral hazard. Contributions and limitations are discussed.
Scholar Commons Citation
Miller, Chandler A., "Employer Moral Hazard in Performance Evaluations: The Effects of Performance Measure Subjectivity and Justification on Employer Opportunism" (2024). USF Tampa Graduate Theses and Dissertations.
https://digitalcommons.usf.edu/etd/10822
