Does Target Setting Improve Value Creation? Evidence from Private Firms Internationally

Target setting is a critical component of management control systems because of its role in resource allocation and performance evaluation. However, empirical research of whether target setting improves value creation has been limited. In this study, we investigate the benefit of target setting using a large-scale multiple-country sample of private firms in the emerging economies. We find that firms with targets create more value and that the effect establishes through various value chain activities. We also find that the benefit of target setting on value creation varies the effect is more pronounced when uncertainty in the firm’s external environment is higher at both the firm-level and the country-level. Overall, our results suggest that target setting is an effective management accounting technique in achieving the goal of value creation