Performance Terms in CEO Compensation Contracts
Review of Finance, Forthcoming
39 Pages Posted: 7 Mar 2014
Date Written: March 5, 2014
In December 2006, the Securities and Exchange Commission issued new rules that require enhanced disclosure on how firms tie CEO compensation to performance. We use this new available data to study the terms of performance-based awards in CEO compensation contracts in S&P 500 firms. We observe large variations in the choice of performance measures. Our evidence is consistent with predictions from optimal contracting theories: firms rely on performance measures that are more informative of CEO actions.
Keywords: CEO Compensation, Market-based Performance Measure, Accounting-based Performance Measure
JEL Classification: G34, G38, J33
Suggested Citation: Suggested Citation