IDEAS home Printed from https://ideas.repec.org/a/bco/bsoaaa/v4y2020p15-26.html
   My bibliography  Save this article

Executive Compensation and Relative Performance Evaluation Relationship Analysis

Author

Listed:
  • Andre Luis Barbosa dos Santos

    (Fucape Business School, Brazil)

Abstract

The research objective is to verify if the variable compensation of executives is established based on the relative performance evaluation, based on their abilities, or if there is the so-called "lucky payment", in which they are benefited or harmed by oscillations that affect the entire market. The literature shows that variable remuneration is characterized as one of the main mechanisms to align interests between investors and executives. In Brazil, there is evidence of a relationship between variable remuneration and managers' performance, but a gap to be filled consists of identifying whether or not such remuneration disregards the systematic component of performance, linked to movements and shocks that affect the entire sector. The sample comprises the listed companies listed in B3, except those operating in regulated segments, such as financial institutions and public utilities. The period of analysis comprises the years 2010 to 2015, where the information on remuneration is now disclosed through the Reference Form. After self-selection control, because of companies that filed injunctions to avoid disclosure of executive compensation, evidence indicates that executives are usually paid "by luck." Only when the market performs negatively and the executive performs above it is that relative performance employed. The research assists in a better understanding of the remuneration policy of Brazilian organizations, complementing other research on the temporal aspect and the comparison of the peers' performances in the sectors.

Suggested Citation

  • Andre Luis Barbosa dos Santos, 2020. "Executive Compensation and Relative Performance Evaluation Relationship Analysis," International Journal of Behavior Studies in Organizations, EUROKD, vol. 4, pages 15-26.
    • Handle: RePEc:bco:bsoaaa::v:4:y:2020:p:15-26
    DOI: 10.32038/JBSO.2020.04.02
    as

    Download full text from publisher

    File URL: https://api.eurokd.com/Uploads/Article/40/JBSO.2020.04.02.pdf
    Download Restriction: no
    File URL: https://libkey.io/10.32038/JBSO.2020.04.02?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Cristiano Machado Costa & Fernando Caio Galdi & Fabio Y. S. Motoki & Juan Manuel Sanchez, 2016. "Non-compliance in Executive Compensation Disclosure: the Brazilian Experience," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 43(3-4), pages 329-369, March.
    2. Albuquerque, Ana, 2009. "Peer firms in relative performance evaluation," Journal of Accounting and Economics, Elsevier, vol. 48(1), pages 69-89, October.
    3. Rajesh K. Aggarwal & Andrew A. Samwick, 1999. "Executive Compensation, Strategic Competition, and Relative Performance Evaluation: Theory and Evidence," Journal of Finance, American Finance Association, vol. 54(6), pages 1999-2043, December.
    4. Carlos Jiménez-Angueira & Nathan Stuart, 2015. "Relative performance evaluation, pay-for-luck, and double-dipping in CEO compensation," Review of Quantitative Finance and Accounting, Springer, vol. 44(4), pages 701-732, May.
    5. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 31(3), pages 129-137.
    6. Xi (Jason) Kuang & Donald V. Moser, 2011. "Wage Negotiation, Employee Effort, and Firm Profit under Output†Based versus Fixed†Wage Incentive Contracts," Contemporary Accounting Research, John Wiley & Sons, vol. 28(2), pages 616-642, June.
    7. Dye, Ra, 1992. "Relative Performance Evaluation And Project Selection," Journal of Accounting Research, Wiley Blackwell, vol. 30(1), pages 27-52.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Carlos Jiménez-Angueira & Nathan Stuart, 2015. "Relative performance evaluation, pay-for-luck, and double-dipping in CEO compensation," Review of Quantitative Finance and Accounting, Springer, vol. 44(4), pages 701-732, May.
    2. An, Suwei, 2023. "Essays on incentive contracts, M&As, and firm risk," Other publications TiSEM dd97d2f5-1c9d-47c5-ba62-f, Tilburg University, School of Economics and Management.
    3. Tor‐Erik Bakke & Hamed Mahmudi & Ashley Newton, 2020. "Performance peer groups in CEO compensation contracts," Financial Management, Financial Management Association International, vol. 49(4), pages 997-1027, December.
    4. Yu, Zeng, 2024. "Essays on incentive contract and corporate finance," Other publications TiSEM 6f66f49e-d710-44f6-943d-9, Tilburg University, School of Economics and Management.
    5. Bushman, Robert M. & Smith, Abbie J., 2001. "Financial accounting information and corporate governance," Journal of Accounting and Economics, Elsevier, vol. 32(1-3), pages 237-333, December.
    6. Chaigneau, Pierre & Edmans, Alex & Gottlieb, Daniel, 2018. "Does improved information improve incentives?," Journal of Financial Economics, Elsevier, vol. 130(2), pages 291-307.
    7. Ormazabal, Gaizka, 2018. "The Role of Stakeholders in Corporate Governance: A View from Accounting Research," CEPR Discussion Papers 12775, C.E.P.R. Discussion Papers.
    8. Hamamura, Jumpei & Hayakawa, Sho, 2019. "The optimal choice of a relative performance indicator in product market competition," MPRA Paper 93921, University Library of Munich, Germany.
    9. Choi, Yoon K. & Han, Seung Hun & Kwon, Yonghyun, 2024. "Relative performance evaluation with business group affiliation as a source of common risk," Global Finance Journal, Elsevier, vol. 60(C).
    10. Christoph Feichter & Frank Moers & Oscar Timmermans, 2022. "Relative Performance Evaluation and Competitive Aggressiveness," Journal of Accounting Research, Wiley Blackwell, vol. 60(5), pages 1859-1913, December.
    11. Sun, Yang & Zhao, Wei, 2024. "Relative performance evaluation in spillover networks," Games and Economic Behavior, Elsevier, vol. 145(C), pages 285-311.
    12. Dirk Jenter & Fadi Kanaan, 2015. "CEO Turnover and Relative Performance Evaluation," Journal of Finance, American Finance Association, vol. 70(5), pages 2155-2184, October.
    13. Ryan T. Ball & Jonathan Bonham & Thomas Hemmer, 2020. "Does it pay to ‘Be Like Mike’? Aspiratonal peer firms and relative performance evaluation," Review of Accounting Studies, Springer, vol. 25(4), pages 1507-1541, December.
    14. Fu, Zheng & Ma, Yechi & Li, Suyang & Qiao, Lu, 2023. "Peer performance and the asymmetric timeliness of earnings recognition," International Review of Financial Analysis, Elsevier, vol. 85(C).
    15. Timmermans, Oscar, 2024. "Cash versus share payouts in relative performance plans," LSE Research Online Documents on Economics 123696, London School of Economics and Political Science, LSE Library.
    16. Martin Holzhacker & Stephan Kramer & Michal Matějka & Nick Hoffmeister, 2019. "Relative Target Setting and Cooperation," Journal of Accounting Research, Wiley Blackwell, vol. 57(1), pages 211-239, March.
    17. Mehtap A. Eklund, 2024. "CEO compensation and market risk: moderating effect of board size and CEO duality in the Swiss context," International Journal of Disclosure and Governance, Palgrave Macmillan, vol. 21(2), pages 227-240, June.
    18. Albuquerque, Ana, 2009. "Peer firms in relative performance evaluation," Journal of Accounting and Economics, Elsevier, vol. 48(1), pages 69-89, October.
    19. Albuquerque, Ana, 2010. "Does firm heterogeneity lead to differences in relative executive compensation?," Finance Research Letters, Elsevier, vol. 7(2), pages 80-85, June.
    20. Dragan Ilić & Sonja Pisarov & Peter S. Schmidt, 2019. "Preaching water but drinking wine? Relative performance evaluation in international banking," Swiss Journal of Economics and Statistics, Springer;Swiss Society of Economics and Statistics, vol. 155(1), pages 1-25, December.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bco:bsoaaa::v:4:y:2020:p:15-26. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sara Gunen (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.