Dissertation
CEO performance evaluation and discretionary bonuses
Doctor of Philosophy (Ph.D.), Drexel University
Mar 2018
DOI:
https://doi.org/10.17918/D8ZH3D
Abstract
As objective measures of performance often do not fully reflect CEO effort, compensation committees have the option to use private and qualitative information to subjectively evaluate CEO performance and pay discretionary bonuses. As the accuracy and informativeness of objective performance measures decrease, compensation committees will place decreased weight on performance evaluation based on objective measures and increased weight on subjective evaluation of CEO performance. Using Big 4 auditors and earnings' ability to predict future cash flows to proxy for the accounting quality, I predict and find that low accounting quality reduces a firm's tendency to pay formula based bonuses, and increases a firm's tendency to pay discretionary bonuses. I further find that long-tenured compensation committee members, who usually have more private information, are more likely to subjectively evaluate CEO performance and their evaluation is more accurate as evidenced by a more positive correlation between changes in current discretionary bonuses and changes in future firm performance. Contrary to common beliefs, I find that powerful CEOs are less likely to receive discretionary bonuses.
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Details
- Title
- CEO performance evaluation and discretionary bonuses
- Creators
- Tao Sun - DU
- Contributors
- Mark Vargus (Advisor) - Drexel University (1970-)Anthony Paul Curatola (Advisor) - Drexel University (1970-)
- Awarding Institution
- Drexel University
- Degree Awarded
- Doctor of Philosophy (Ph.D.)
- Publisher
- Drexel University; Philadelphia, Pennsylvania
- Number of pages
- vi, 61 pages
- Resource Type
- Dissertation
- Language
- English
- Academic Unit
- Accounting; Bennett S. LeBow College of Business; Drexel University
- Other Identifier
- 7890; 991014632930004721