Does new performance appraisal system (EVA) affect earnings management?

2020 ◽  
Vol 11 (2) ◽  
pp. 191-216
Author(s):  
Weifeng He ◽  
Liping Chen ◽  
Wei Liu
Keyword(s):  
Earnings Management ◽  
Performance Appraisal ◽  
Management System ◽  
Real Earnings Management ◽  
Appraisal System ◽  
Content Type ◽  
Decision Control ◽  
Performance Appraisal System ◽  
And Control ◽  
Research Studies

Purpose Currently, most research studies focus on ownership reforms and governance reforms, while only a few research studies focus on management system innovations. Based on an evolution of state-owned enterprises’ (SOEs) performance appraisal systems, this paper investigates the influence of performance appraisal system on earnings management. Design/methodology/approach Using a natural experiment that central government-owned enterprises (CGOEs) carried out economic value-added performance appraisal (EVA-PA) in 2010, the authors adapt difference-in-difference method to analyze the relationship between EVA-PA and earnings management choice. Furthermore, the authors consider the situation which contained financial status, separation between decision-making rights and decision-control rights, separation between ownership and control and industrial characteristics. Findings The research finds that after carrying out EVA-PA, CGOEs prefer accrual-based earnings management to real earnings management, and there is substitution effect between the two types of earnings management. Moreover, further research studies reveal that enterprises suffering losses in the previous year and featuring higher separation between decision-making rights and decision-control rights and higher separation between ownership and control have stronger earnings management motive under EVA-PA. In contrast, enterprises achieving satisfactory financial performance in the previous year and engaging in businesses within protective industry have weaker earnings management motive under EVA-PA. After the implementation of EVA-PA, accrual-based earnings management and real earnings management both impair operating performances of CGOEs. Originality/value Theoretically, this paper enriches research studies on earnings management from the perspective of incentive mechanism and expands research studies on economic consequences of EVA-PA. In addition, it validates the relationship between the two types of earnings management. As an important mechanism of corporate management and control, performance appraisal system is an important part for establishing ownership management system and improving internal management system of SOEs.

Growing pains: problems in the performance appraisal of China's state-owned enterprises transformed from governmental organizations

2012 ◽  
Vol 2 (8) ◽  
pp. 1-10
Author(s):  
Huang Gui ◽  
Fu Chunguang ◽  
Chen Jingli ◽  
Pan Minting
Keyword(s):  
Performance Management ◽  
Performance Appraisal ◽  
Management System ◽  
Assessment System ◽  
Performance Management System ◽  
Appraisal System ◽  
Content Type ◽  
Governmental Organization ◽  
Growing Pains ◽  
Performance Appraisal System

Study level/applicability This case is suitable for undergraduates, MBA students and students from business administration departments in the teaching of human resources management and performance management. Case overview Luodian Electric Power Construction Corporation Group (LEPCC Group) is a state owned enterprise transformed from a construction unit of Luopu Power Supply Bureau (LPSB), a governmental organization in charge of all the electricity supply in Luopu City. The general manager of LEPCC, Gu Ming tried to set up a modern market-oriented management system for LEPCC. Unfortunately the problems that had accumulated in the past two decades during which LEPCC was a governmental organization made his reforms very difficult. The first headache for Gu Ming was the performance appraisal reform in LEPCC. The existing performance appraisal system seemed to have at least three problems in practice: unclear appraisal objectives, an improper assessment system, a different appraisal standard for similar positions. What should Gu Ming do to build a proper performance appraisal system to help the fast-growing LEPCC Group to make LEPCC a competitive market-oriented player? Expected learning outcomes The first objective of this case is to enable students to understand that the issues of working performance are issues of people first, rather than issues of the management system. If the management focuses on the system instead of on the staff of the company to design the performance management system, the system will be fruitless and inefficient. The second objective is to cultivate students' capability to apply the basic theories of human resource management and the knowledge of performance appraisal in case analysis and practical management. This case, seemingly about performance appraisal, is in fact about the organizational structure and processes of the organization. Reform should start with organizational analysis, job analysis and job descriptions. Only when all these have been done correctly, can the performance management system be designed more reasonably, scientifically and efficiently. Supplementary materials Teaching notes are available; please consult your librarian for access.

The relationship between performance appraisal system and employees' voice behavior through the mediation-moderation mechanism

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Khalid Rasheed Memon ◽  
Bilqees Ghani
Keyword(s):  
Performance Appraisal ◽  
Psychological Empowerment ◽  
Vital Role ◽  
Voice Behavior ◽  
Perceived Fairness ◽  
Appraisal System ◽  
Empowering Leadership ◽  
Content Type ◽  
Performance Appraisal System ◽  
The Relationship

PurposeThe purpose of this study is to investigate and articulate the performance appraisal process as a tool, used for the development of voice behavior through the fostering of trustworthiness and empowering culture in the organization.Design/methodology/approachData has been collected through survey instruments, filled by employees and their coworkers. The study proposes and tests a new model based on the relationship between performance appraisal and voice behavior through the moderation-mediation mechanism. Data analysis has been performed using SEM through SMART PLS 3.FindingsResults show that a strong and positive relationship exists between performance appraisal and voice behavior through the mediating variable of psychological empowerment. The moderators, empowering leadership and perceived fairness have played vital role in boosting psychological empowerment and strengthening the relationship with performance appraisal.Research limitations/implicationsThe study presents the performance appraisal system as one of the antecedents of employees' voice behavior generated through psychological empowerment (mediator) and perceived fairness and empowering leadership (moderators) since the appraisal system is to be implemented through the leader.Originality/valueThe study presents a unique and innovative idea while it tries to explore and measure the different effects/impacts of the relationship between performance appraisal and voice behavior.

Lessons for improving your formal performance appraisal process

2017 ◽  
Vol 16 (1) ◽  
pp. 32-38 ◽  
Author(s):  
Clinton Longenecker ◽  
Laurence Fink
Keyword(s):  
Focus Groups ◽  
Performance Appraisal ◽  
Design Methodology ◽  
Value Added ◽  
Appraisal System ◽  
Content Type ◽  
Performance Appraisal System ◽  
Performance Appraisal Process ◽  
Appraisal Systems ◽  
Practical Implications

Purpose The purpose of this paper is to identify the specific steps organizations can take to create value-added appraisal systems. Design/methodology/approach The authors synthesize 30 years of their research, including countless focus groups and surveys with managers at all levels, to identify the specific steps organizations can take to create value-added appraisal systems. Findings The paper explains ten key lessons for improving any organization’s performance appraisal system. Practical implications The authors believe that the lessons described in this paper can be applied in all organizations, and not to apply these lessons invites ineffective and potentially destructive appraisal practices. Originality/value The paper provides a unique set of lessons that organizations can use to design or re-design their performance appraisal systems and practices.

Is it time to do away with Annual Performance Appraisal System?

2016 ◽  
Vol 24 (3) ◽  
pp. 7-10 ◽  
Author(s):  
Anita Sarkar
Keyword(s):  
Performance Management ◽  
Performance Appraisal ◽  
Feedback Mechanism ◽  
Team Work ◽  
Appraisal System ◽  
Content Type ◽  
Performance Appraisal System ◽  
Employee Attrition ◽  
Traditional Performance ◽  
New System

Purpose The purpose of this paper is to describe factors that determine scrapping of traditional performance appraisal system. Design/methodology/approach The study explains how the new system of feedback giving is aligned with the requirement of performance management system. Findings Traditional performance appraisal often created employee dissatisfaction, stalled employee creativity and team work, and increased employee attrition and missed out on performance improvement of employees. New check-in system promises to develop employees on the basis of continuous feedback mechanism. Originality/value This paper aims to provides insights on how the new system of performance management is connected to overall needs of the organization and the employees.

A Study On Performance Appraisal Techniques In A Selected Industry

2019 ◽  
Vol 118 (5) ◽  
pp. 66-73
Author(s):  
M. Jayaseely
Keyword(s):  
Performance Management ◽  
Performance Appraisal ◽  
Management System ◽  
High Performance ◽  
Employee Performance ◽  
Growth Management ◽  
Performance Standards ◽  
Performance Management System ◽  
Appraisal System ◽  
Performance Appraisal System

Performance appraisal system operates in which an individual manager regularly, annually records performance and developments in top down process. It can be argued that perceived defects of appraisal system led to development of more sound concepts of performance appraisal. The provision of challenging assignments and regular performance feedback are included in effective performance management system. At the end of the performance period usually a year the supervisor and employee meet to summarize the accomplishments and challenges of the past year and document the discussion using performance management form. In any organization to be effective the resources should be property maintained. The study concentrates on finding whether the current performance management system followed in organization is effective and how far they are satisfied and whether all the employees all aware of performance standards fixed for them and promotions are given based on performance. It also suggests whether any change is required in the existing system.  Success with performance appraisal system relies on good design and implementation. Managing employee performance is an effective mechanism for developing both employee and organization growth. Management and employee involvement in the design/review of a performance management system is important performance appraisal can be redesigned for betterment of performance. Thus performance appraisal is a shared commitment to high performance.

Employee performance appraisal system development in the National Library and Archives of Iran (NLAI): soft operational research approach

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Babak Zendehdel Nobari ◽  
Aryan Gholipour ◽  
Elham Ebrahimi ◽  
Ali Shoja
Keyword(s):  
Change Management ◽  
Performance Appraisal ◽  
Operational Research ◽  
Employee Performance ◽  
Lessons Learned ◽  
Research Approach ◽  
Appraisal System ◽  
National Library ◽  
Content Type ◽  
Performance Appraisal System

PurposeThe performance evaluation process is a key step in any management system and constitutes the basis for continuous improvement. Resistance to change is considered as a critical factor in any change management project; so, development of employee performance appraisal systems like all of the change management projects has always faced many challenges. This study seeks to illustrate the two-year experience (2018–2020) and lessons learned by developing an employee performance appraisal system in the National Library and Archives of Iran (NLAI) as a cultural public sector organization.Design/methodology/approachThis study was carried out by using soft operational research (OR) approaches, using a novel combination of two methods, soft system methodology (SSM) and importance performance analysis (IPA). For this purpose, at the beginning, with the help of the SSM approach, the challenges of implementation was identified, then, using the opinions and experiences of the system's stakeholders, improvement actions were defined and prioritized using the IPA method.FindingsThe research findings showed that “coaching development,” “optimizing the forced distribution rating system (FDRS)” and “customizing the system” are the most important improvement actions.Originality/valueThe research has bridged the gap between research and practice in the field of employee performance appraisal system in national libraries.

scholarly journals Simulation-based analysis of a forced distribution performance appraisal system

2017 ◽  
Vol 1 (2) ◽  
pp. 120-136
Author(s):  
Lee Evans ◽  
Ki-Hwan Bae
Keyword(s):  
System Dynamics ◽  
Performance Appraisal ◽  
Discrete Event ◽  
System Structure ◽  
Appraisal System ◽  
Content Type ◽  
Us Army ◽  
Simulation Based ◽  
Performance Appraisal System ◽  
Forced Distribution

Purpose The paper aims to estimates the limitations of a forced distribution performance appraisal system in identifying the highest performing individuals within an organization. Traditionally, manpower modeling allows organizations to develop plans that meet future human resource requirements by modeling the flow of personnel within an organization. The aim is to quantify the limitations of a performance appraisal system in identifying the best-qualified individuals to fill future requirements. Design/methodology/approach This paper describes an exploratory study using discrete event simulation based on the assignment, evaluation and promotion history of over 2,500 officers in the US Army. The obtained data provide a basis for estimating simulation inputs that include system structure, system dynamics, human behavior and policy constraints. The simulation approach facilitates modeling officers who receive evaluations as they move throughout the system over time. Findings The paper provides insights into the effect of system structure and system dynamics on the evaluation outcome of employees. It suggests that decreasing the number of a rater’s subordinates has a significant effect on the accuracy of performance appraisals. However, increasing the amount of time individuals spend on each assignment has little effect on system accuracy. Practical implications This research allows an organization’s leadership to evaluate the possible consequences associated with evaluation policy prior to policy implementation. Originality/value This work advances a framework in assessing the effect of system dynamics and structure, and the extent to which they limit or enhance the accuracy of an organization’s forced distribution performance appraisal system.

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