Publications
Publications
- September 2016
- Accounting Review
The Effect of Target Difficulty on Target Completion: The Case of Reducing Carbon Emissions
By: Ioannis Ioannou, Shelley Xin Li and George Serafeim
Abstract
Targets are an integral component of management control systems and play a significant role in achieving desirable performance outcomes. We focus on a key environmental performance objective—reduction of carbon emissions—as a setting in which to examine how target difficulty affects the degree of target completion in long-term nonfinancial performance. We use a novel dataset compiled by the Carbon Disclosure Project (CDP) and find that firms setting more difficult targets complete a higher percentage of such targets. We also find that this effect is negatively moderated by the provision of monetary incentives. We corroborate this evidence by showing that target difficulty is more effective for carbon reduction projects requiring more novel knowledge and in high-pollution industries. We discuss limitations and suggest avenues for future research.
Keywords
Sustainability; Target-setting; Management Accounting; Management Accounting And Control Systems; Control Systems; Sustainable Development; Environment; Goals and Objectives; Climate Change; Management Systems; Accounting; Environmental Sustainability
Citation
Ioannou, Ioannis, Shelley Xin Li, and George Serafeim. "The Effect of Target Difficulty on Target Completion: The Case of Reducing Carbon Emissions." Accounting Review 91, no. 5 (September 2016).