Value Creation, Performance Evaluation and Managerial Decisions on SG & A Expenditure

Download or read book Value Creation, Performance Evaluation and Managerial Decisions on SG & A Expenditure written by Rong Huang and published by . This book was released on 2006 with total page 186 pages. Available in PDF, EPUB and Kindle. Book excerpt: The existing managerial accounting literature has investigated how firms incentivize and reward managers based on financial and non-financial measures of outcomes to motivate managers to take desired actions, such as expending resources on activities that enhance shareholder value. An alternative approach to induce managers' right action is to alleviate the penalty for input resource expenditure that increases shareholder value. In this study, I focus on the expenditure on selling, general and administrative (SG & A) activities, excluding R & D and advertising. I investigate whether the capital market and the executive labor market recognizes the long-term value generated by SG & A expenditure, how firms design incentive contracts to alleviate the penalty on value-enhancing SG & A expenditure and whether the incentives effectively lead to desired managerial actions.