Journal of Accounting and Economics Vol. 21 No. 2 1996
CEO compensation: The role of individual performance evaluation
Abstract
We investigate use of individual performance evaluation in CEOs' annual incentive plans. In contrast with relatively objective accounting and stock-price-based measures, individual performance evaluation may involve discretion and subjectivity, as well as nonfinancial and financial performance criteria. Based on agency theory, we predict that individual performance evaluation increases with the importance of growth opportunities relative to assets in place, length of product development and product life cycles, and noise in traditional financial measures. Using proprietary compensation data, we find evidence that individual performance evaluation increases with growth opportunities and product time horizon.
- DOI
- 10.1016/0165-4101(95)00416-5
- Volume
- 21
- Issue
- 2
- Pages
- 161-193
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref