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- W2911745228 endingPage "89" @default.
- W2911745228 startingPage "55" @default.
- W2911745228 abstract "Many argue that the design of compensation contracts for public company chief executive officers (CEOs) is often not guided by a goal of value maximization. Yet, there is limited direct empirical evidence on the negative consequences of the proposed inefficient contracting between shareholders and CEOs. Using data on CEO bonus contracts of the S&P 500 firms, we investigate potential firm performance implications of the use of qualitative criteria such as leadership and mentoring in those contracts. We maintain that unlike quantitative criteria, qualitative criteria are difficult to define and measure on an objective basis, possibly resulting in an inefficient and biased incentive structure. Twenty-five percent of the sample observations have CEO bonus contracts that include a qualitative criterion for bonus payment determination. Our results show that employee productivity, asset productivity, capital expenditures, and future abnormal stock returns are lower for firms that use a qualitative criterion in CEO bonus contracts than those that do not. Further, contrary to the argument in prior literature that earnings management decreases with the use of subjective performance indicators in incentive contracts, we find that income-increasing accruals are actually higher when the CEO bonus contract includes a qualitative criterion. We recommend that compensation committees set concrete, measurable performance goals for CEOs, providing CEOs with better guidance and helping improve their corporate decision making." @default.
- W2911745228 created "2019-02-21" @default.
- W2911745228 creator A5040684427 @default.
- W2911745228 creator A5074730200 @default.
- W2911745228 date "2019-06-26" @default.
- W2911745228 modified "2023-09-27" @default.
- W2911745228 title "Firm Performance Implications of Using Qualitative Criteria in CEO Bonus Contracts" @default.
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- W2911745228 doi "https://doi.org/10.1108/s1474-787120190000031004" @default.
- W2911745228 hasPublicationYear "2019" @default.