The Effect of Prior Performance Information on Leniency in Subjective Performance Evaluation

Abstract

This paper examines whether supervisors’ leniency in subjective performance evaluation is influenced by the prior performance information of subordinates. While prior studies have used proxies for leniency based on aggregate objective performance level or median of subjective scales, I develop the proxy for leniency at the performance measure level based on prior performance level which is found to be more relevant to the current subjective performance score. I analyze archival performance evaluation data of multiple state-owned enterprises (SOEs) in Korea over multiple time periods which enables me to develop the new definition of leniency. Utilizing this data set, I empirically find that lenient rating persists over time, and that larger (smaller) amount of leniency is applied to low (high) prior performers and harshly (leniently) evaluated performers in the previous period. The results have important implications for understanding the incentives of raters which differ with respect to their previous performance information.