Executive Compensation and Performance in the Brazilian Market: Contemporary and Lagged Relationships

Andson Braga de Aguiar and Renê Coppe Pimentel

RAC - Revista de Administração Contemporânea (Journal of Contemporary Administration), 2017, vol. 21, issue 4, 545-568

Abstract: This paper examines the relation between executive compensation and performance in Brazilian companies. The analysis focuses on: (a) the motivational effect of contemporary and lagged compensation level and pay elements on financial and market performance; and (b) the hypothesis of pay-performance sensitivity. Based on longitudinal data including 333 companies for the period from 2011 to 2015, our results indicate that the relation between compensation and performance is significant for financial as well as market performance, and for short-term performance as well as long-term performance. Our results also indicate that increases in the level of compensation lead to future superior performance. Finally, our results suggest the existence of bidirectional relationship between compensation and performance.

Date: 2017
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