Accounting Earnings and Executive Compensation: The Role of Earnings Persistence

Posted: 14 Jul 1997

See all articles by William R. Baber

William R. Baber

Georgetown University - Department of Accounting and Business Law

Sok-Hyon Kang

George Washington University - School of Business

Krishna R. Kumar

George Washington University

Date Written: June 1997

Abstract

This study investigates whether relations between accounting earnings and executive compensation depend on earnings persistence. The analysis is informed by prior studies that link executive compensation with accounting earnings and those that link security returns with earnings persistence. We expect that the sensitivity of executive compensation to accounting earnings varies directly with earnings persistence. We also expect that the weights assigned to earnings levels and earnings changes vary with earnings persistence in predictable ways. Results for a cross- sectional analysis of cash compensation paid to CEO s of 712 U.S. firms are consistent with these expectations.

JEL Classification: J33, M41

Suggested Citation

Baber, William R. and Kang, Sok-Hyon and Kumar, Krishna R., Accounting Earnings and Executive Compensation: The Role of Earnings Persistence (June 1997). Available at SSRN: https://ssrn.com/abstract=8539

William R. Baber (Contact Author)

Georgetown University - Department of Accounting and Business Law ( email )

McDonough School of Business
Washington, DC 20057
United States

Sok-Hyon Kang

George Washington University - School of Business ( email )

405 Government Hall
GWU
Washington, DC 20052
United States
(202) 994-6058 (Phone)
(202) 994-5164 (Fax)

Krishna R. Kumar

George Washington University ( email )

710 21st Street NW
Washington, DC 20052
United States
202-994-5976 (Phone)
202-994-5164 (Fax)

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