Target ratcheting and effort reduction |
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| Authors: | Jan Bouwens Peter Kroos |
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| Institution: | 1. Tilburg University, Department of Accountancy, P.O. Box 90153, 5000 LE Tilburg, The Netherlands;2. VU University Amsterdam, Department of Accounting, De Boelelaan 1105, 1081HV Amsterdam, The Netherlands;1. Climate and Energy Area/Green Economy Area, Institute for Global Environmental Strategies (IGES), 2108-11, Kamiyamaguchi, Hayama, Kanagawa 240-0115, Japan;2. NewClimate Institute, Am Hof 20-26, 50667 Cologne, Germany;1. School of Accounting, The University of New South Wales, NSW 2052, Australia;2. The University of Sydney Business School, NSW 2006, Australia;1. Western University, 1151 Richmond Street, London, Ontario, N6A 3K7, Canada;2. Lazaridis School of Business and Economics, Wilfrid Laurier University, 75 University Avenue West, Waterloo, Ontario, N2L 3C5, Canada;1. Fuqua School of Business, Duke University, Durham, NC 27708, USA;2. National Bureau of Economic Research, Cambridge, MA 02912, USA;1. Kenneth G. Dixon School of Accounting, University of Central Florida, Orlando, FL, 32816-1400, USA;2. Katz Graduate School of Business, University of Pittsburgh, Pittsburgh, PA, 15260, USA;1. University of Chicago Booth School of Business, 5807 S. Woodlawn Avenue, Chicago, IL 60637, USA;2. University of North Carolina, Kenan-Flagler Business School, USA |
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| Abstract: | In this paper, we examine how retail store managers reduce their sales activity in response to target ratcheting. We find that managers with favorable sales performance in the first three quarters reduce their sales activity in the final quarter. We also document that managers who engage in sales reducing activities enhance their likelihood of meeting their next-year sales target, which is based on their current sales. That is, managers who reduce their sales activity in the final quarter are more likely to beat their next-year sales targets than managers who refrain from reducing their final-quarter sales. |
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