This study extends prior research b

This study extends prior research by examining a fairly common
sequence of business events: numeric outcome information is produced and
reviewed, decisions are influenced by this information, and the process repeats
(i.e., a feedback loop occurs). We find that incentivized decision makers exhibit
substantial decision improvement after only one iteration of summary outcome
feedback. In contrast, other between-subjects groups fail to improve performance
across iterations of Luft and Shields’ (2001) forecasting task. Our results suggest that
financial incentives and outcome feedback are both critical to performance
improvement in relatively complex iterative tasks. When either incentives or feedback
is absent, performance suffers. While prior research has found outcome feedback
relatively ineffective at improving complex task performance, our results indicate that
outcome feedback and incentives complement each other to improve performance.
We believe exploring the interaction of incentives and feedback offers interesting
avenues for future accounting research.