Long-Term Incentive Design and Firm Performance

Liana Bomm ()
Additional contact information
Liana Bomm: Paderborn University

No 181, Working Papers Dissertations from Paderborn University, Faculty of Business Administration and Economics

Abstract: Executive compensation increasingly relies on long-term incentives (LTIs) to align managerial decision-making with firms' long-term objectives. Prior research provides mixed evidence on the relationship between LTIs and firm performance, with most studies relying on aggregate measures of long-term incentives. Using panel data on executives from 80 German DAX and MDAX firms covering the period 2006–2021, this study employs fixed-effects panel regressions to distinguish between equity- and cash-based LTIs, examine the relative weighting of LTIs within executive compensation, and analyze differences across organizational contexts proxied by compensation regimes. The results reveal systematically different relationships between equity- and cash-based LTIs across accounting- and market-based performance measures and across different time horizons. The relative weighting of LTIs provides information beyond compensation levels, and the relationships between executive incentive structures and firm performance vary across organizational contexts. Overall, the findings demonstrate the importance of moving beyond aggregate measures toward a more differentiated understanding of executive incentive design by jointly considering the form of long-term incentives, their relative weighting within the overall compensation package, and the organizational context in which they operate.

Keywords: Executive Compensation; Long-Term Incentives; Incentive Design; Compensation Structure; Firm Performance (search for similar items in EconPapers)
JEL-codes: G30 G34 J33 M12 (search for similar items in EconPapers)
Pages: 57
Date: 2026-07
References: Add references at CitEc
Citations:

Downloads: (external link)
https://groups.uni-paderborn.de/wp-wiwi/RePEc/pdf/dispap/DP181.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:pdn:dispap:181

Access Statistics for this paper

More papers in Working Papers Dissertations from Paderborn University, Faculty of Business Administration and Economics Contact information at EDIRC.
Bibliographic data for series maintained by WP-WiWi-Info ().