The Effect of Missing a Quarterly Earnings Benchmark on the CEO'S Annual Bonus

36 Pages Posted: 12 Apr 2001

See all articles by Chul W. Park

Chul W. Park

The University of Hong Kong - School of Business

Steven R. Matsunaga

University of Oregon

Multiple version iconThere are 2 versions of this paper

Date Written: February 2001

Abstract

We investigate the effects of missing quarterly earnings benchmarks on the CEO's annual bonus. After controlling for the general pay-for-performance relation, we find a significant incremental adverse effect on CEO annual cash bonuses when the firm's quarterly earnings fall short of the consensus analyst forecast or the earnings for the same quarter of the prior year for at least two quarters during the year. However, we find that the relation between the bonus and the number of loss quarters is not significant. Our results suggest that CEO bonus payments provide CEOs with economic incentives to meet quarterly analyst earnings forecasts and earnings from the same quarter of the prior year.

Keywords: Executive compensation; Quarterly earnings benchmark; Earnings management

JEL Classification: M41, M43, J33

Suggested Citation

Park, Chul Won and Matsunaga, Steven R., The Effect of Missing a Quarterly Earnings Benchmark on the CEO'S Annual Bonus (February 2001). Available at SSRN: https://ssrn.com/abstract=262191 or http://dx.doi.org/10.2139/ssrn.262191

Chul Won Park

The University of Hong Kong - School of Business ( email )

Meng Wah Complex
Pokfulam Road
Hong Kong
China
+852-2859-1081 (Phone)

Steven R. Matsunaga (Contact Author)

University of Oregon ( email )

Lundquist College of Business
1208 University of Oregon
Eugene, OR 97403
United States
503-346-3340 (Phone)
503-346-3341 (Fax)

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
637
Abstract Views
3,428
rank
44,908
PlumX Metrics