P. Oyer, FISCAL YEAR ENDS AND NONLINEAR INCENTIVE CONTRACTS - THE EFFECT ON BUSINESS SEASONALITY, The Quarterly journal of economics, 113(1), 1998, pp. 149-185
Salesperson and executive compensation contracts typically specify a n
onlinear relationship between firm revenues and pay. These agents ther
efore have incentive to manipulate prices, influence the timing of cus
tomer purchases, and vary effort over their firms' fiscal years. This
paper empirically establishes results consistent with agents' focusing
on performance over the fiscal year. Most notably, in addition to var
ying with the calendar business cycle, manufacturing firms' sales are
higher at the end of the fiscal year, and lower at the beginning, than
they are in the middle. Further evidence is found in fiscal-year pric
e movements and patterns in the industry variation of fiscal-year effe
cts.