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Managers tend to provide subjective performance evaluations that are relatively high (leniency) and not very dispersed (compression). This paper reports on an experiment that investigates whether the layout of performance reports affects the leniency and compression of managers’ subjective evaluations. Relying on psychology theory, we predict that subjective ratings will be higher and more compressed if performance reports contain alphabetically listed indicators rather than categorically listed indicators (as in a balanced scorecard). Moreover, we predict that ratings will be higher and more compressed if performance reports present indicator target and actual values in tables than when this information is presented in graphs. The results from the experiment provide support for the hypothesis that performance ratings are higher if measures are listed in alphabetical order as opposed to presented in a four-category balanced scorecard format. However, there is no support for the other hypotheses. We discuss the implications of the study for accounting research and practice.
Maas et al. (Tue,) studied this question.