Open AccessThe Relevance Of Firms Accounting And Market Performance For CEO Compensation
Author(s) -
Augustine Duru,
Raghavan J. Iyengar
Publication year - 2011
Publication title -
journal of applied business research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.149
H-Index - 22
eISSN - 2157-8834
pISSN - 0892-7626
DOI - 10.19030/jabr.v17i4.2095
Subject(s) - predictive power , executive compensation , accounting , variance (accounting) , compensation (psychology) , relevance (law) , business , econometrics , explanatory power , economics , corporate governance , finance , psychology , philosophy , epistemology , political science , psychoanalysis , law
This paper investigates the relationship between several different CEO compensation components and several firm performance metrics using canonical correlation analysis (CCA). The principal findings presented in this paper offer evidence supporting the pay-performance relationship in corporate America. CEOs bonuses are closely associated with accounting measures of performance whereas CEO’s long-term compensation is directly linked to firm’s market performance. Furthermore, a substantial portion of the variance in CEOs bonus is explained by firm performance variables. Firm performance measures have some predictive power for CEO bonus but very little predictive power for other compensation measures.