Implications of Economic Shocks for CEO Performance Evaluation

Claudine Mangen

European Accounting Review, 2017, vol. 26, issue 4, 629-650

Abstract: I study the implications of economic shocks for objective and subjective CEO performance evaluation. A shock perturbs pay-setting parties' information about the firm and the CEO. I argue that pay-setting parties then lack information they need for evaluating the CEO objectively, and de-emphasize objective CEO performance evaluation in favor of subjective CEO performance evaluation; over time, pay-setting parties become better informed about the firm as well as the CEO, and increasingly use again objective CEO performance evaluation. My evidence, which uses data on objective and subjective CEO performance evaluation in US executive pay between 1992 and 2013, is consistent with my argument.

Date: 2017
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DOI: 10.1080/09638180.2016.1175363

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