Evolving evaluations: subjective performance and firm life cycle
Yafei Zu, Mengyao QiaoPurpose
As the new technological revolution reshapes firm life cycles, firms must adapt their subjective performance evaluations of top managers to suit their current stage of development. This study investigates the relationship between specific types of subjective performance evaluation and firm life-cycle stages. Furthermore, it examines the cross-sectional patterns, influence pathways, and economic consequences of this relationship.
Design/methodology/approach
Using empirical data from Chinese listed firms spanning 2011–2024, this study employs a logit model to examine the relationship between subjective performance evaluation types and firm life-cycle stages.
Findings
Firms in the growth stage tend to employ subjective adjustments to motivate top managers, whereas firms in the maturity stage tend to rely on subjective performance measures. These matching relationships vary significantly across firms with different ownership types, levels of market competition, board supervision, and managerial power. An appropriate match between subjective performance evaluation types and firm life-cycle stages enhances firm performance through the pathways of risk-taking and interest coordination.
Originality/value
This study contributes to management control research by extending dynamic contingency theory to distinguish between types of subjective performance evaluation and to show their alignment with firm life-cycle stages. It further integrates behavioral agency and classical agency theories to reveal the dual mechanisms of risk-taking and interest coordination, explaining how dynamic fit enhances performance through behavioral and informational channels, thereby moving beyond conventional agency perspectives.