Financial distress, Population base rates, Loan review Actions, Group decision making

Examines negotiated transfer-pricing outcomes between a buying and selling division by using a bilateral bargaining methodology. Motivation and hypotheses; Manipulation checks and subject cavariates; Implications for research.

[Negotiation is frequently advocated as a transfer-pricing mechanism in decentralized organizations to foster greater divisional autonomy and to improve firm profit performance. Empirical evidence reveals that many firms rely upon negotiation in determining transfer prices. A concern, however, is that negotiation may not always be efficient in terms of maximizing firmwide profits, or equitable with regard to divisional performance evaluation. Given external market opportunities and private information with respect to divisional cost and revenue functions, one division could conceivably make itself better off at the expense of another or the firm as a whole. This study used a bilateral bargaining methodology to examine negotiated transfer-pricing outcomes between a buying and selling division. The negotiation was nonzero sum; that is, market externalities existed. Each division had private profit information. One hundred and thirty-four subjects participated in face-to-face negotiations. Experimental manipulation included a mixed-incentive (company and divisional) scheme versus a divisional-incentive scheme; single-period versus multiperiod negotiations; and varying levels of market price uncertainty in the negotiations. It was hypothesized that divisional-incentive schemes would increase profit differences between divisions but would be more effective in terms of maximizing overall company profits. Absent learning effects, a negotiation history was expected to increase company profits as bargaining strategies evolved over time. Finally, divisional profit differences were hypothesized to increase in the face of uncertain market alternatives available to either the buying or selling division. The results indicate that divisional incentives did not produce greater divisional profit differences than mixed incentives. However, as hypothesized, uncertain outside market alternatives significantly increased divisional profit differences. Company profits increased significantly under divisional incentives and through time. Finally, single-period profits were significantly lower than final multiperiod profits. The results have potentially important implications for research on negotiated transfer pricing under decentralization. First, divisional profit-based incentives appear to motivate negotiators to achieve higher company profits regardless of outside market alternatives. Bargaining strategies evolved over time, leading to an increase in company profits. Negotiated transfer prices, however, do not always attain the desired objective of maximizing companies' profits or providing equitable divisional performance evaluation. This was particularly true in cases of short negotiation histories and in cases of uncertain market environments. Results of this study suggest that one way to mitigate these dysfunctional consequences is through the company's incentive system. Mixed (company and divisional) incentives in uncertain environments appear to lead to more integrative agreements, benefiting both the company and the division. Because these results are based upon analysis of experiments, caution must be exercised in generalizing the conclusions beyond this setting.]

This study investigated the role of financial information disclosure on union‐management preferences for labor contract outcomes. The effect of accounting information on negotiated outcome proximity to Nash equilibrium outcomes was also examined. Both the extent and credibility of financial information disclosure as well as dyadic and team negotiations were examined. Conjoint analysis was used to measure union and management preferences for contract attributes. Results indicated insignificant conjoint part worth differences on union and management contractual preferences under both accounting information and team negotiation treatments. Actual contractual outcomes were significantly correlated with Nash predictions, and information disclosure had a marginally significant effect on the proximity of actual to predicted outcomes. Résumé. Les auteurs étudient le rôle de la présentation d'informations financières dans les préférences du syndicat et de la direction en ce qui a trait au contrat de travail final. Ils s'intéressent également à l'incidence de l'information comptable lorsque les conventions négociées se rapprochent de l'équilibre de Nash. L'étendue et la crédibilité de l'information financière présentée ainsi que les négociations dyadiques et collectives sont aussi objet d'étude. Les auteurs ont recours à l'analyse conjointe pour mesurer les préférences du syndicat et de la direction à l'égard des attributs du contrat de travail. Les résultats indiquent des écarts non significatifs dans la valeur conjointe partielle associée par le syndicat et la direction aux attributs du contrat, par suite du traitement de l'information comptable ainsi que de la négociation collective. Le contrat final qui résulte présente une corrélation significative avec les prévisions de Nash, et la communication d'informations a une incidence marginale sur l'analogie entre les résultats réels et les résultats prévus.