Abstract

http://ssrn.com/abstract=1668758
 
 

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The Impact of the Reward Structure on Stickiness


Eelke Wiersma


VU University Amsterdam - Department of Accounting

August 30, 2010

AAA 2011 Management Accounting Section (MAS) Meeting Paper

Abstract:     
Prior research has related cost stickiness to characteristics of the firm’s costs structure and managerial decisions. In this paper, I study the impact of the relative level of short term oriented bonuses in the manager’s reward system on stickiness. When managers have a relatively higher level of annual bonuses they have more incentives to decrease their firm’s resource level immediately after a decrease in sales. When the annual bonus is a smaller part of the total reward package, they might wait longer before they decrease the resource level, because sales might increase again in the near future.

Based on a sample of 2569 firms (16,033 firm-years) that are included in the Executive Comp database, I find that a higher percentage of bonuses in the total reward package leads to a lower stickiness level. These results are robust against the inclusion of a number of controls that capture the impact of the firm’s cost structure on stickiness.

Number of Pages in PDF File: 29

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Date posted: October 7, 2010 ; Last revised: December 10, 2010

Suggested Citation

Wiersma, Eelke, The Impact of the Reward Structure on Stickiness (August 30, 2010). AAA 2011 Management Accounting Section (MAS) Meeting Paper. Available at SSRN: http://ssrn.com/abstract=1668758 or http://dx.doi.org/10.2139/ssrn.1668758

Contact Information

Eelke Wiersma (Contact Author)
VU University Amsterdam - Department of Accounting ( email )
De Boelelaan 1105
Amsterdam, 1081 HV
Netherlands
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