Who Cares About the Future? Short- and Long-Term Performance Measures and Their Impact on Firm Success
47 Pages Posted: 18 Feb 2021
Date Written: February 12, 2021
Finding an incentive system that optimally controls managerial effort and improves firm performance is an evergreen issue in both research and practice. Corporate governance recommendations and practical implementations aim at preventing short termism and promoting broad yet individual effort assessment. Nevertheless, their benefits are less clear and might reverse in reality. This paper presents comprehensive evidence for the interference of short- and long-term performance measures based on panel data from German public companies’ remuneration reports. The findings show that short-term orientation is not necessarily harmful, but individually negotiated goals can encourage managerial selfishness to the detriment of the firm.
Keywords: corporate governance; performance measurement; time horizons; individual performance measures
JEL Classification: M49
Suggested Citation: Suggested Citation