An International Meeting of the American Accounting Association American Accounting Association 2006 Annual Meeting August 6–9, 2006 Washington, D.C.

M. Elizabeth Haywood
Rider University

Nathan V. Stuart
University of South Florida

Abstract: We study how mental accounting for multiple performance signals affects performance evaluation. We explore whether the disaggregation of performance measures, as in a balanced scorecard, affects performance evaluations. We find that performance ratings are the same regardless of whether the performance report contains a single aggregate score or several disaggregated scores. We then investigate whether an individual’s propensity to think differently about financial and nonfinancial information, and about information related to success and failure, also affects evaluations. We find that the type of measure (financial or nonfinancial) and the outcome relative to target (above plan or below plan) interact significantly to affect performance evaluations. Our results suggest that firms may have to make additional adjustments to their performance evaluation processes in order to obtain the potential decision-influencing benefits of a balanced scorecard measurement system.

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