Does Performance-Based Managerial Compensation Affect Subsequent Corporate Performance?

Author / Creator

Abowd, John M

Available as

Online

Summary

Abstract: An effective performance-based compensation system must increase the probability of. Abstract: high performance corporate outcomes in order to justify the incremental expense relative. Ab...

Abstract: An effective performance-based compensation system must increase the probability of.

Abstract: high performance corporate outcomes in order to justify the incremental expense relative.

Abstract: to a straight salary system. A positive relation between current performance and current.

Abstract: compensation indicates that the pay system is performance-based in practice, if not.

Abstract: explicitly. This study considers whether increasing the sensitivity of current.

Abstract: compensation to current performance is associated with higher performance in the future.

Abstract: For accounting-based performance measures, there is only weak evidence that greater.

Abstract: performance-based compensation is associated with improved future performance. However.

Abstract: for economic and market performance measures, there is stronger evidence. Payment of an.

Abstract: incremental 10% bonus for good economic performance is associated with a 30 to 90 basis.

Abstract: point increase in the expected after tax gross economic return in the following fiscal.

Abstract: year. Payment of an incremental raise of 10' following a good stock market performance is associated with a 400 to 1200 basis point increase in expected total shareholder return.

Abstract: These results are comparable in magnitude when compared to the intrinsic variability of.

Abstract: the performance measure considered.

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