Group versus individual compensation schemes for senior executives and firm performance: Some evidence based on archival data

Publisher:
Elsevier Ltd
Publication Type:
Journal Article
Citation:
Journal of Contemporary Accounting and Economics, 2014, 10 (2), pp. 100 - 114
Issue Date:
2014-01
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The objectives of this paper are (i) to provide evidence on the association between the choice of group versus individual compensation schemes for senior executives and firm characteristics, and (ii) to provide evidence on the economic consequences of adopting a particular compensation scheme. Our key findings based on 2517 firm years for the period of 20012010 show that on average, the choice between group or individual compensation schemes for senior executive compensation schemes are consistent with a firms economic characteristics and on average, the choice of compensation schemes does not affect subsequent firm performance. However, we find some evidence that firms that adopt compensation schemes inconsistent with their economic characteristics have lower subsequent performance. Our findings are robust to a number of sensitivity tests.
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