151752-Thumbnail Image.png
Description
In this study, I examine the extent to which firms rely on relative performance evaluation (RPE) when setting executive compensation. In particular, I examine whether firms use information about peer performance to determine compensation at the end of the year,

In this study, I examine the extent to which firms rely on relative performance evaluation (RPE) when setting executive compensation. In particular, I examine whether firms use information about peer performance to determine compensation at the end of the year, i.e. after both firm and peer performance are observed. I find that RPE is most pronounced for firms that allow little or no scope for ex post subjective adjustments to annual bonuses. Conversely, firms that rely mainly on subjectivity in determining bonus exhibit little use of RPE. These findings suggest that information about peer performance is not used at the end of the year. Instead, peer performance seems to be incorporated in performance targets at the beginning of the year, at least among firms primarily using objective performance measurements. In addition, I provide new evidence on the determinants of the use of subjectivity.
Reuse Permissions


  • Download restricted.

    Details

    Title
    • Relative performance evaluation and the use of discretionary bonuses in executive compensation
    Contributors
    Date Created
    2013
    Resource Type
  • Text
  • Collections this item is in
    Note
    • thesis
      Partial requirement for: Ph. D., Arizona State University, 2013
    • bibliography
      Includes bibliographical references (p. 24-26)
    • Field of study: Accountancy

    Citation and reuse

    Statement of Responsibility

    by Stephanie Tsui

    Machine-readable links