[Relative performance evaluation (RPE) is the process of comparing performances across workers. Relative performance information (RPI) allows a superior to better infer a particular worker's unobservable effort level than would otherwise be possible, and analytical studies have demonstrated that RPE may be an optimal strategy for mitigating the effects of moral hazard if the workers face some common uncertainty (Baiman and Demski 1980; Holmstrom 1980, 1982; Wolfson 1985). Although these analytical studies provide important insights into the role of RPE, they ignore the intrinsic value of comparing workers' performances as asserted (Locke 1968) or demonstrated (Beck and Seta 1980; Harkins and Jackson 1985; Klinger 1969) in behavioral studies. Holmstrom (1982, 325) specifically states that "inducing competition among [workers] by tying their rewards to each other's performance has no intrinsic value." That is, formal models do not assign any intrinsic value to RPE because they emphasize the economic rather than behavioral factors that influence workers' responses to RPE. Consideration of the direct effects of both behavioral and economic factors on effort can provide a better understanding of the potential benefits from RPE. In this study, variables suggested by formal models-that of Holmstrom (1982) in particular-are used to examine the importance of economic and behavioral factors in explaining the motivational effects of comparing workers' performances. Specifically, the direct effects on effort of (1) the degree of common uncertainty among the workers and (2) compensation as a function of RPI are examined in a setting where workers know that they and their supervisor will receive RPI. Several assumptions of agency theory are used to develop hypotheses about the importance of economic factors, and social influence research is used to develop hypotheses about the importance of behavioral factors. The hypotheses were tested in a laboratory experiment that required subjects to act as managers and make production decisions for a hypothetical company. Half the subjects worked under a profit-sharing contract that based compensation solely on their absolute performance, and the remaining subjects worked under an RPE contract that based compensation on both their absolute performance and performance relative to the RPI. There were three levels of common uncertainty, and it was manipulated by varying the number of sources of uncertainty that subjects had in common. Subjects' risk and effort preferences were induced experimentally. The experimental results support the importance of both economic and behavioral factors, depending on the type of contract examined. Subjects' effort levels increased significantly as the degree of common uncertainty increased with the RPE contract, but not with the non-RPE contract. In addition, effort levels were higher under the RPE contract than under the non-RPE contract. These results imply that behavioral factors can be important determinants in motivating effort and that future attempts to model behavior analytically may need to consider these factors. The results also provide weak evidence that economic factors, such as contract type, may enhance or mitigate the importance of behavioral factors in motivating effort.]

Presents a study that examines the importance of economic and behavioral factors in explaining the motivational effects of comparing workers' performances. Relative performance evaluation (RPE); Effects of common uncertainty; Social influence.

Reviews the book `Marking to Market: Accounting for Marketable Securities in the Financial Services Industry,' by Richard Macve and Jonathan Jackson.

This paper examines the relation between inventory method choice and both managerial ownership and outside ownership concentration. It is hypothesized that a conflict of interest between managers and shareholders can arise over Inventory method choice, and that ownership structure, in part, determines how potential conflicts of interest are resolved. The evidence is consistent with this hypothesis as the Inventory choice appears to be related to both managerial ownership and outside ownership concentration. When managerial ownership is low, the likelihood of LIFO is negatively related to managerial ownership. However, when managerial ownership is high, the likelihood of LIFO is positively related to managerial ownership. Higher outside ownership concentration appears to increase the likelihood of LIFO, ceteris paribus.

[This paper examines the relation between inventory method choice and both managerial ownership and outside ownership concentration. It is hypothesized that a conflict of interest between managers and shareholders can arise over inventory method choice, and that ownership structure, in part, determines how potential conflicts of interest are resolved. The evidence is consistent with this hypothesis as the inventory choice appears to be related to both managerial ownership and outside ownership concentration. When managerial ownership is low, the likelihood of LIFO is negatively related to managerial ownership. However, when managerial ownership is high, the likelihood of LIFO is positively related to managerial ownership. Higher outside ownership concentration appears to increase the likelihood of LIFO, ceteris paribus.]

Reviews the book "Accounting Bibliography," by Walter Hausdorfer.

Reviews the book "Tax Planning for Educators 1987."

[In this study, sections of working papers from audits performed by one office of a public accounting firm were obtained and investigated. The working papers contained the information documented from the preliminary evaluation of internal control over the accounts receivable/sales area. Data from the working papers were provided as input, and discriminant analysis was used to construct a descriptive model of the auditor preliminary evaluation judgments. The model correctly predicted about 80 percent of the individual auditor judgments, which is significantly more accurate than a chance model, and the importance of the presence or absence of particular control activities on the auditors' evaluations was investigated from the model.]

In this study, sections of working papers from audits performed by one office of a public accounting firm were obtained and investigated. The working papers contained the Information documented from the preliminary evaluation of internal control over the accounts receivable/sales area. Data from the working papers were provided as Input, and discriminant analysis was used to construct a descriptive model of the auditor preliminary evaluation judgments. The model correctly predicted about 80 percent of the individual auditor judgments, which is significantly more accurate than a chance model, end the importance of the presence or absence of particular control activities on the auditors' evaluations was investigated from the model.