A substantial number of empirical studies on the linear relationship between executive compensation and firm performance for European firms suggest that the pay-performance sensitivity is not significantly positive. We argue that a nonlinear structure fits the data better, because compensation

Managers in divisionalized firms frequently engage in intrafirm trade in addition to their day-to-day operations. The incentives literature has, for the most part, looked separately at the problems of eliciting operating effort (the agency problem) and of guiding intrafirm trade and relationship-specific investments (the

I study the relation between the level of exogenous “risk”and pay-for-performance sensitivity (P P S) of optimal contracts. I …rst show that none of the known restrictions allow for exogenous risk in the standard principal-agent model. Next, I identify restrictions that support using the …rst

This study examines the variables influencing CEO compensation in the technology sector using both exclusively exogenous and interchangeably exogenous and endogenous variables. The study was confined to a single industry to isolate industry compensation practices which may be smoothed out in multi-industry studies. Multiple equations in a vector autoregressive model were used to explain compensation in recognition of the endogeneity of variables such as sales growth, stock returns and net income. Using US firms listed on the NASDAQ, we find that CEO compensation (measured separately as salary only, stock option grants only and total compensation from all sources) to be significantly explained by firm size, the ability to reduce debt, the ability to fund growth, net income and personal characteristics. CEOs are rewarded for achieving profitability. While there is an expectation of innovation in the technology sector with research and develop-ment expenditure increasing both sales and stock returns, such innovation only contributes to CEO compensation if it is translated into rising net income in an environment of debt-reduction. Further, CEOs are rewarded for implementing disruptive technology as a competitive strategy. The ability to fund growth is pertinent for the technology sector which may be restricted in its

to constrain executives ’ pay-performance sensitivity than firms with less cash holdings do. Empirical evidence also shows a increasing pay-performance sensitivity after adopting IFRS in China. The changes of the fair value for investment property are recognized from the equity to income statement may

This research was supported by the Deutsche

and dismissal incentives, most CEOs hold trivial fractions of their firm's stock and ownership levels have declined over the past 50 years. We hypothesize that public and private political forces impose constraints that reduce the pay-performance sensitivity. Declines in both the pay-performance relation

detailed analyses of annual bonus plans, executive stock options, and option valuation), international pay differences, the pay-setting process, the relation between CEO pay and firm performance (“pay-performance sensitivities”), the relation between sensitivities and subsequent firm performance, relative

Abstract: Core and Guay (2001) argue that there is an increasing relation between an executive’s pay-performance sensitivity (incentives) and firm risk, in contrast to the findings in Aggarwal and Samwick (1999) and the predictions of principal-agent models such as Holmstrom and Milgrom (1987

A comparison of CEO pay–performance sensitivity in privately-held and public firms☆ Huasheng Gao a,1, Kai Li b,2 act de e rete