Compensation and Incentives in german Corporations

Moritz Heimes () and Steffen Seemann ()
Additional contact information
Moritz Heimes: Department of Economics, University of Konstanz, Germany
Steffen Seemann: Department of Economics, University of Konstanz, Germany

No 2011-20, Working Paper Series of the Department of Economics, University of Konstanz from Department of Economics, University of Konstanz

Abstract: In this paper we analyze executive compensation in Germany for the period 2005-2009. We use a self-collected dataset on compensation arrangements in German corporations to estimate the impact of firm performance and firm risk on executive pay. To be in line with earlier studies in this literature, we first measure firm performance and firm risk based on stock market returns. Our findings support the prediction from agency theory that incentive pay decreases with firm risk. We find, however, that stock market returns have no explanatory power in the presence of accounting based performance measures. Based on accounting data we also find a positive impact of firm performance on executive pay and a negative relationship between firm risk and incentive pay for our sample period. We conclude that shareholders use accounting measures rather than stock market data to evaluate and pay for manager performance. We also find that with accounting data we can explain short-term bonus payments but not long-term oriented compensation in German corporations.

Keywords: Pay for Performance; Executive Compensation; Incentives (search for similar items in EconPapers)
JEL-codes: G30 J33 M12 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2011-05-31
New Economics Papers: this item is included in nep-bec, nep-eff, nep-eur, nep-hrm and nep-lab
References: Add references at CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://www.uni-konstanz.de/FuF/wiwi/workingpaperse ... 1-Heimes-Seemann.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:knz:dpteco:1120

Ordering information: This working paper can be ordered from
https://www.wiwi.uni-konstanz.de/en

Access Statistics for this paper

More papers in Working Paper Series of the Department of Economics, University of Konstanz from Department of Economics, University of Konstanz Contact information at EDIRC.
Bibliographic data for series maintained by Office Ursprung ( this e-mail address is bad, please contact ).