An Empirical Analysis of Continuing Improvements Following the Implementation of a Performance-Based Compensation Plan
Rajiv D. Banker
Temple University - Fox School of Business and Management; Temple University
Sungshin Women's University
University of Pittsburgh - Katz Graduate School of Business
Journal of Accounting and Economics, Vol. 30, No. 3, December 2000
Performance improvements subsequent to the implementation of a pay-for-performance plan can result because more productive employees self-select into the firm (selection effect) and/or because employees allocate effort to become more effective (effort effect). We analyze individual performance data for 3,776 sales employees of a retail firm to evaluate these alternative sources of continuing performance improvement. The incentive plan helps the firm attract and retain more productive sales employees, and motivates these employees to further improve their productivity. In contrast, the less productive sales employees' performance declines before they leave the firm.
Keywords: Salesforce compensation; Pay-for-performance; Self selection; Incentive plans; Moral hazard; Productivity improvement
JEL Classification: D82, J33, M12, M30Accepted Paper Series
Date posted: May 24, 2001
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo3 in 0.328 seconds