We investigate two determinants of two choices in the control system of divisionalized firms, namely decentralization and use of performance measures. The two determinants are those identified in the literature as important to control system design: (1) information asymmetries between corporate and divisional managers and (2) division interdependencies. We treat decentralization and performance measurement choices as endogenous variables and examine the interrelation among these choices using a simultaneous equation model. Using data from 78 divisions, our results indicate that decentralization is positively related to the level of information asymmetries and negatively to intrafirm interdependencies, while the use of performance measures is affected by the level of interdependencies among divisions within the firm, but not by information asymmetries. We find some evidence that decentralization choice and use of performance measures are complementary.
Skip Nav Destination
Research Article| July 01 2004
Determinants of Control System Design in Divisionalized Firms
Margaret A. Abernethy;
The Accounting Review (2004) 79 (3): 545–570.
- Views Icon Views
- Share Icon Share
- Search Site
Margaret A. Abernethy, Jan Bouwens, Laurence van Lent; Determinants of Control System Design in Divisionalized Firms. The Accounting Review 1 July 2004; 79 (3): 545–570. doi: https://doi.org/10.2308/accr.2004.79.3.545
Download citation file: