| Article ID | Journal | Published Year | Pages | File Type |
|---|---|---|---|---|
| 5100516 | Journal of Financial Economics | 2016 | 24 Pages |
Abstract
We examine the performance impact of the relative quality of a Chief Executive Officer (CEO)'s compensation peers (peers to determine a CEO's overall compensation) and bonus peers (peers to determine a CEO's relative-performance-based bonus). We use the fraction of peers with greater managerial ability scores (Demerjian, Lev, and McVay, 2012) than the reporting firm to measure this CEO's relative peer quality (RPQ). We find that firms with higher RPQ earn higher stock returns and experience higher profitability growth than firms with lower RPQ. Learning among peers and the increased incentive to work harder induced by the peer-based tournament contribute to RPQ's performance effect.
Related Topics
Social Sciences and Humanities
Business, Management and Accounting
Accounting
Authors
Bill Francis, Iftekhar Hasan, Sureshbabu Mani, Ye Pengfei,