An Examination of Economic Value Added and Executive Compensation
18 Pages Posted: 13 Jun 2002
Despite a growing literature, the relationship between the structure of executive compensation and firm performance is not fully understood. Furthermore, little work has been done on the link between Economic Value Added (EVA) as a measure of firm performance and the form of executive compensation. An examination of the compensation structure and economic value added of 209 companies in 1995 - 1998 provides evidence supporting incentive compensation. Economic Value Added is found to be positively and significantly related to incentive based compensation. Cash based remuneration, was found to be unrelated to EVA performance.
Keywords: Executive Compensation; Economic Value Added; Australia
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