Compensation goals and firm performance

• 成果类型: Article
• 署名作者: Bennett, Benjamin; Bettis, J. Carr; Gopalan, Radhakrishnan; Milbourn, Todd
• 署名单位: University System of Ohio; Ohio State University; Arizona State University; Arizona State University-Tempe; Washington University (WUSTL)
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2017.01.010
• 发表日期: 2017
• 页码: 307-330
• 关键词: Executive compensation; managerial incentives

摘要

Using a large data set of performance goals employed in executive incentive contracts, we find that a disproportionately large number of firms exceed their goals by a small margin as compared to the number that fall short of the goal by a similar margin. This asymmetry is particularly acute for earnings goals, when compensation is contingent on a single goal, when the pay-performance relationship around the goal is concave-shaped, and for grants with non-equity-based payouts. Firms that exceed their compensation target by a small margin are more likely to beat the target the next period and CEOs of firms that miss their targets are more likely to experience a forced turnover. Firms that just exceed their Earnings Per Share (EPS) goals have higher abnormal accruals and lower Research and Development (R&D) expenditures, and firms that just exceed their profit goals have lower Selling, General and Administrative (SG&A) expenditures. Overall, our results highlight some of the costs of linking managerial compensation to specific compensation targets. (C) 2017 Elsevier B.V. All rights reserved.