Antecedents and Consequences of Subjective Performance Evaluation: Empirical Field Evidence

Abstract

This paper empirically examines sequential effects of objective measures such as attendance frequency and seniority on subjective performance evaluations, and the impact of compressed performance ratings on the subordinate’s effort, cash bonuses, and stock bonuses in the future, as well as to what extent compression ratings persist. The results of this study providing field empirical evidence in Taiwan during the period 2004-2007 show that both seniority and attendance frequency of the worker positively influence superior’s subjective evaluation of worker performance. Besides, compressed performance ratings lead to lower performance improvements of workers. More importantly, a compression of performance ratings leads to higher cash bonuses, but has no impact on stock bonuses. Finally, a worker will be more likely to get an above-average rating in the subsequent period if he got an above-average rating in the previous period than if he did not.