Home > Research > Publications & Outputs > Contractual features of CEO performance-vested ...

Electronic data

  • ontractual Features of CEO Performance-Vested Equity Compensation

    Rights statement: This is the author’s version of a work that was accepted for publication in Journal of Contemporary Accounting and Economics. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Journal of Contemporary Accounting and Economics, 13, 3, 2017 DOI: 10.1016/j.jcae.2017.09.005

    Accepted author manuscript, 490 KB, PDF document

    Available under license: CC BY-NC-ND: Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License

Links

Text available via DOI:

View graph of relations

Contractual features of CEO performance-vested equity compensation

Research output: Contribution to journalJournal article

Published

Standard

Contractual features of CEO performance-vested equity compensation. / Gao, Zhan; Hwang, Yuhchang; Wu, Wan-Ting.

In: Journal of Contemporary Accounting and Economics , Vol. 13, No. 3, 12.2017, p. 282-303.

Research output: Contribution to journalJournal article

Harvard

Gao, Z, Hwang, Y & Wu, W-T 2017, 'Contractual features of CEO performance-vested equity compensation', Journal of Contemporary Accounting and Economics , vol. 13, no. 3, pp. 282-303. https://doi.org/10.1016/j.jcae.2017.09.005

APA

Gao, Z., Hwang, Y., & Wu, W-T. (2017). Contractual features of CEO performance-vested equity compensation. Journal of Contemporary Accounting and Economics , 13(3), 282-303. https://doi.org/10.1016/j.jcae.2017.09.005

Vancouver

Gao Z, Hwang Y, Wu W-T. Contractual features of CEO performance-vested equity compensation. Journal of Contemporary Accounting and Economics . 2017 Dec;13(3):282-303. https://doi.org/10.1016/j.jcae.2017.09.005

Author

Gao, Zhan ; Hwang, Yuhchang ; Wu, Wan-Ting. / Contractual features of CEO performance-vested equity compensation. In: Journal of Contemporary Accounting and Economics . 2017 ; Vol. 13, No. 3. pp. 282-303.

Bibtex

@article{577b4b7f8f6440e08dc6ea2c4b27400c,
title = "Contractual features of CEO performance-vested equity compensation",
abstract = "We investigate the key contractual features of CEO performance-vested (p-v) equity compensation. We hypothesize that contractual features such as relative performance evaluation (RPE), the performance period length, and the number of performance metrics can be configured to improve the informativeness of performance metrics. Consistent with the hypotheses, we find that firms using market metrics are more likely to adopt RPE and long performance periods than firms using accounting metrics. The effects of performance metrics on RPE and performance periods remain prominent after we allow these features to be jointly determined. Moreover, we find that RPE is positively associated with longer performance periods, suggesting that the two features complement each other in improving the informativeness of performance metrics in p-v equity compensation. Our findings not only reveal the intricate relations between the contractual features, but also provide empirical support for the voting guidelines by proxy advisory services and have implications for the evolving practice of executive compensation.",
keywords = "CEO compensation, contract design, performance metrics, relative performance evaluation, performance period, corporate governance",
author = "Zhan Gao and Yuhchang Hwang and Wan-Ting Wu",
note = "This is the author{\textquoteright}s version of a work that was accepted for publication in Journal of Contemporary Accounting and Economics. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Journal of Contemporary Accounting and Economics, 13, 3, 2017 DOI: 10.1016/j.jcae.2017.09.005",
year = "2017",
month = dec
doi = "10.1016/j.jcae.2017.09.005",
language = "English",
volume = "13",
pages = "282--303",
journal = "Journal of Contemporary Accounting and Economics ",
issn = "1815-5669",
publisher = "Elsevier Limited",
number = "3",

}

RIS

TY - JOUR

T1 - Contractual features of CEO performance-vested equity compensation

AU - Gao, Zhan

AU - Hwang, Yuhchang

AU - Wu, Wan-Ting

N1 - This is the author’s version of a work that was accepted for publication in Journal of Contemporary Accounting and Economics. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Journal of Contemporary Accounting and Economics, 13, 3, 2017 DOI: 10.1016/j.jcae.2017.09.005

PY - 2017/12

Y1 - 2017/12

N2 - We investigate the key contractual features of CEO performance-vested (p-v) equity compensation. We hypothesize that contractual features such as relative performance evaluation (RPE), the performance period length, and the number of performance metrics can be configured to improve the informativeness of performance metrics. Consistent with the hypotheses, we find that firms using market metrics are more likely to adopt RPE and long performance periods than firms using accounting metrics. The effects of performance metrics on RPE and performance periods remain prominent after we allow these features to be jointly determined. Moreover, we find that RPE is positively associated with longer performance periods, suggesting that the two features complement each other in improving the informativeness of performance metrics in p-v equity compensation. Our findings not only reveal the intricate relations between the contractual features, but also provide empirical support for the voting guidelines by proxy advisory services and have implications for the evolving practice of executive compensation.

AB - We investigate the key contractual features of CEO performance-vested (p-v) equity compensation. We hypothesize that contractual features such as relative performance evaluation (RPE), the performance period length, and the number of performance metrics can be configured to improve the informativeness of performance metrics. Consistent with the hypotheses, we find that firms using market metrics are more likely to adopt RPE and long performance periods than firms using accounting metrics. The effects of performance metrics on RPE and performance periods remain prominent after we allow these features to be jointly determined. Moreover, we find that RPE is positively associated with longer performance periods, suggesting that the two features complement each other in improving the informativeness of performance metrics in p-v equity compensation. Our findings not only reveal the intricate relations between the contractual features, but also provide empirical support for the voting guidelines by proxy advisory services and have implications for the evolving practice of executive compensation.

KW - CEO compensation

KW - contract design

KW - performance metrics

KW - relative performance evaluation

KW - performance period

KW - corporate governance

U2 - 10.1016/j.jcae.2017.09.005

DO - 10.1016/j.jcae.2017.09.005

M3 - Journal article

VL - 13

SP - 282

EP - 303

JO - Journal of Contemporary Accounting and Economics

JF - Journal of Contemporary Accounting and Economics

SN - 1815-5669

IS - 3

ER -