Management Accounting Frontiers

Editorial: Only a Three-Legged Stool? A Review of the Concept of Alignment in the Economics of Performance Management

This editorial revisit the concept of alignment within the agency theoretic view of organisational performance management. Based on an analysis of a real-life case, we examine how far the theoretical reasoning based on the concept of ‘three-legged stool’ is practically relevant. Findings of our case suggests that while there is seemingly misalignment among the three established structures of performance evaluation, decision right allocation and incentive compensation, the ‘misalignment’ is ‘repaired’ with the support of two other governance structures namely, HR and CRM policies. We believe that the design of performance management is not to be confined to the ‘three-legged stool’ but practically extended to other forms of governance structures. […]

Management Accounting Frontiers

Using Fund Transfer Pricing as a Performance Measurement System in the Financial Service Industry

As a response to the financial crisis of 2007-2008, financial service industry regulators have commonly requested financial service industry to implement fund transfer pricing (FTP) mechanisms. Despite the importance of the topic as highlighted in the practitioners’ literature since the 2000s, the use of FTP as a performance measurement system has been understudied. To add to our understanding of such mechanisms in the financial service industry, this paper demonstrates, through an analytical model, how FTP can be used as a performance measurement system in financial institutions. More importantly, this paper illustrates how FTP can be used for overcoming the distortions caused due to the transfer of funds between the business units. […]

Management Accounting Frontiers

Carbonvestments: Appraising Investments in a Carbonomics Environment

Polluting the environment with carbon emissions will be no longer free once governments impose carbon pricing. Early movers which start incorporating carbon thinking in business decisions will be winners in the low carbon future. Companies subject to carbon caps under a carbon trading scheme can either invests in carbon sequestration project and or buy carbon credits to offset their carbon liabilities – commonly known as ‘make’ or ‘buy’ decision. While Net Present Value (NPV) has been recorded as the most popular appraisal technique used globally for project valuation purposes, finance theorist suggests that real options (RO) analysis is a more superior technique to value investment opportunities. Using case study data, this study examines how RO approach provides more strategic insights than traditional NPV in valuing carbon sequestration investments (carbonvestments). […]