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   MGT723 Research Project  Semester 2 2017Assessment Task 1: Research ProposalStudent Name:Your assigned research topic*: CLIMATE CHANGEDraft Research Question: What is the implication of information asymmetry and performance-based incentives on the target slack? A review of agency theory on climate changeTitle: Agency Theory on international climate changeSubmission Date: January 12, 2018  Acknowledgement:I certify that I have carefully reviewed the university’s academic misconduct policy. I understand that the source of ideas must be referenced and that quotation marks and a reference are required when directly quoting anyone else’s words.          Literature Review – SummaryClimate change is undeniably one of the illustrious issues that have been discussed in the 20th century regarding environmental conservation. The discourse of climatic change appeared before the onset of globalization and international trade. In understanding the issue of climate change, the agency theory is utilized by most of the researchers. Azevedo & Akdere (2014) study provides that agency theory involves separation of ownership and control, and with this in place, the policies and guidelines that are developed by the board of directors will incline on growth of the entity and conservation of environment. However Steen et al. (2016) study claims that agency costs should be managed as this will negate the role of the business in the sector including the link between the monitoring, bonding, and the residual loss. The behaviour of the agent in every entity should be based on linking the incentives to the performance level while also assessing the implication of the operations on the environmental degradation. Azevedo & Akdere (2014) study also argues that the issue of slack is important when assessing the budgetary allocation process and incentivizing of employees when dealing with policy development. The budgetary process should provide managers with an opportunity for setting easy and manageable targets on increasing remuneration, decreasing required effort, achieving the desired target, and ensuring that agency costs are maintained at the lowest possible level. With time, as argued by Pontes (2015), information asymmetry decreases over time, and it is attributed to the management’s lack of effective and reliable strategies that can enhance conformity with the previous year’s target. The study conducted by Wang & Lin (2014), showed that implementation of challenging targets can always imply that the incentives developed can easily moderate the effect. Also, where there is information asymmetry, there is the possibility for the managers creating slack in their targets. As such, the performance-based incentives that are undertaken by the manager will increase the pressure of the manager in creating a larger slack.           Conceptual Model: Independent Variable??Dependent VariableTarget SlackPerformance-based incentivesInformation Asymmetry            From the above conceptual model framework, the focus of the study is on demonstrating the link between the information asymmetry and performance-based incentives towards creating a target slack that hampers the realization of sustainability in the policies and frameworks for climatic change. It is important to ascertain whether the first year of operations and decision making can imply that the target slack will be lower or higher as compared to the subsequent years of operation—attributed to information asymmetry. The study will also explore the link between performance-based incentives and the target slack that is reported in the organization.            HypothesesHypothesis 1:  Target slack will be greater in the first year in which targets are set.Hypothesis 2: Target slack will be greater in the presence of performance based incentives.                                                                                                      Proxy Measures for Theoretical Constructs  Theoretical ConstructProxy measureDependent (DV), Independent (IV), or Control Variable (CV)SourceSlack• Increase the remuneration of the agents in an attempt to offset the overall cost incurred in the organization. • Decrease in the required effort based on the targets set by the management.  • Strategizing to achieve the target sets even when the conditions have changed. • Need to find out how slack has been operationalised in the budgetary slack literature and apply it to the carbon emissions. Perhaps the budget difficulty relative to the industry average or extent to which targets are achieved.Dependent Variable (DV)Azevedo & Akdere (2014) Steen et al. (2016) Barnes (2013)Information Asymmetry• Information asymmetry decreases over time. Measured as the number of previous years that the organisation has been setting targets for carbon emissions. Independent Variable (IV)Huang et al. (2014) Performance-based incentives • Increase in the set targets affects the efforts that are placed on attaining the respective targets. • In the first year of operation, the target set will be met and performance-based incentives achieved but this will decrease with increase in years of operations. • Managers’ effort to realize the target is often maximized in the first year of setting the target. There is high probability that the target will be met in the first year.   Independent Variable (IV)Sloof & van (2014) Guo & Yolles (2016)   Research Method:In testing the hypothesis, both the qualitative and quantitative research methodology will be assessed. The quantitative research strategy employed aims at determining the period in which the emissions of CO2 can be attained. The use of gross global scope emissions in determining the metric tonnes for CO2 will be essential in providing a clear framework on whether there has been an increase or decrease in the metric tonnes. The qualitative research method will be utilized in this project, and this will provide an opportunity for understanding the views of the managers and agents in relation to their strategy in reducing the target slack. The data collection strategy that will be employed is the use of interviews and questionnaires. The interviews will cover wide range of issues that will necessitate understanding of the managers’ contribution towards meeting the target slack in the conservation of environment. Questionnaires will involve both close-ended and open-ended questionnaires as some of the issues that will be discussed require further explanation and providing the views of the management on the reasons for undertaking such strategy. The sample size for this research will be 1,047, and this will involve the listed companies in the stock exchange market. The sample size will be a representative for the large population in the industry. The data analysis technique will rely on statistical framework and it will use pie charts and tables as the basis for explaining the hypothesis.                 ReferencesAzevedo, R. E., & Akdere, M. (December 01, 2014). Examining Agency Theory in Training & Development: Understanding Self-Interest Behaviors in the Organization. Human Resource Development Review, 10, 4, 399-416. Barnes, B. (2013). Understanding agency: Social theory and responsible action. London: Sage. Guo, K., & Yolles, M. (2016). The changing organization: Agency theory in a cross-cultural context. Cambridge, Mass: MIT Press.Huang, W., Jiang, F., Liu, Z., & Zhang, M. (June 01, 2014). Agency cost, top executives’ overconfidence, and investment-cash flow sensitivity — Evidence from listed companies in China. Pacific-basin Finance Journal, 19, 3, 261-277. Pontes, M. C. (December 07, 2015). Agency theory. Health Care Management Review, 20, 4, 57-67. Sloof, R., & van, P. C. M. (January 01, 2014). Performance measurement, expectancy and agency theory: An experimental study. Journal of Economic Behavior and Organization, 67, 3, 794-809. Steen, J., Coopmans, C., & Whyte, J. (August 11, 2016). Structure and agency? Actor-network theory and strategic organization. Strategic Organization, 4, 3, 303-312. Wang, K. & Lin, C.. (September 01, 2014). Pecking-Order Theory Revisited: The Role of Agency Cost. The Manchester School, 78, 5, 395-411.  7 | Page 

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