Description
The relative performance evaluation (RPE) hypothesis holds that executive compensation should not depend on uncontrollable exogenous shocks. Nevertheless, prior studies often find limited empirical support for this hypothesis in part because it is difficult to identify peers exposed to the same exogenous shocks. I propose a new way to identify peers and to test the RPE hypothesis in the context of a specific shock. In particular, I select peers based on the sensitivity of their stock returns to exchange rate fluctuations. I find evidence that firms respond to large exchange rate movements by ex post adjusting their peer selection to include peers with similar exchange rate risk exposure. Moreover, after allowing for ex post peer group adjustments, I find a much stronger support for the RPE hypothesis than most of prior work.
Details
Title
- Exchange Rate Risk and Relative Performance Evaluation
Contributors
- Chen, Bing (Author)
- Matejka, Michal (Thesis advisor)
- Casas Arce, Pablo (Committee member)
- Kaplan, Steve (Committee member)
- Arizona State University (Publisher)
Date Created
The date the item was original created (prior to any relationship with the ASU Digital Repositories.)
2017
Subjects
Resource Type
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Note
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Doctoral Dissertation Accountancy 2017