Journal of Accounting and Economics Vol. 16 No. 1-3 1993
Accounting earnings and top executive compensation
Abstract
This paper investigates the role of accounting earnings in top executive compensation contracts. It provides evidence in support of the hypothesis that earnings-based incentives help shield executives from market-wide factors in stock prices. The paper demonstrates that earnings reflect firm-specific changes in value, but are less sensitive to market-wide movements in equity values. As a result, the inclusion of earnings-based performance measures in executive compensation contracts helps shield executives from fluctuations in firm value that are beyond their control. The hypothesis is shown to explain cross-sectional variation in the use of earnings-based incentives.
- DOI
- 10.1016/0165-4101(93)90005-z
- Volume
- 16
- Issue
- 1-3
- Pages
- 55-100
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref