Performance peer groups in CEO compensation contracts

Tor‐Erik Bakke, Hamed Mahmudi and Ashley Newton

Financial Management, 2020, vol. 49, issue 4, 997-1027

Abstract: How do firms choose performance peer groups used in chief executive officer (CEO) relative performance evaluation contracts? We find that while firms, for the most part, choose performance peers to better identify their CEOs’ impact on firm performance, they also tend to select underperforming peers. Dynamically, we find that peers that are added and retained every year are weaker than ones that were not chosen. These findings suggest managers may have some influence on the choice of performance peers. Finally, using a quasi‐natural experiment, we find that enhanced disclosure did not affect the tendency of firms to select underperforming peers.

Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
https://doi.org/10.1111/fima.12296

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:bla:finmgt:v:49:y:2020:i:4:p:997-1027

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0046-3892

Access Statistics for this article

Financial Management is currently edited by William G. Christie

More articles in Financial Management from Financial Management Association International Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().