The Relation between CEO Compensation and Past Performance

被引：95

作者：

Banker, Rajiv D. ^{[1
]}

Darrough, Masako N. ^{[2
]}

Huang, Rong ^{[2
]}

Plehn-Dujowich, Jose M. ^{[1
]}

机构：

[1] Temple Univ, Philadelphia, PA 19122 USA

[2] CUNY Bernard M Baruch Coll, New York, NY 10010 USA

来源：

ACCOUNTING REVIEW | 2013年 / 88卷 / 01期

关键词：

executive compensation; past performance; salary; bonus; adverse selection; moral hazard; EXECUTIVE-COMPENSATION; MANAGERIAL ABILITY; STOCK-PRICE; TRADE-OFF; AGGREGATION;

D O I：

10.2308/accr-50274

中图分类号：

F8 [财政、金融];

学科分类号：

0202 ;

摘要：

This study focuses on the relation between current compensation and past performance measures as signals of a chief executive officer's (CEO's) ability. We develop a simple two-period principal-agent model with moral hazard and adverse selection and test theoretical predictions using CEO compensation data from 1993-2006. Consistent with the predictions, we find that salary (bonus) is positively (negatively) associated with past performance for both continuing and newly hired CEOs. We also find that while current salary is positively associated with future performance, current bonus is not. As the model suggests, salary is adjusted to meet the reservation utility and information rent, and is positively correlated over time to reflect ability. Bonus serves to address moral hazard and adverse selection by separating high-ability agents into riskier contracts. Our results indicate that it is important to disaggregate cash compensation into salary and bonus components to understand the dynamic interaction between incentives and performance.

引用

页码：1 / 30

页数：30