THESIS
2017
ix, 50 pages : illustrations ; 30 cm
Abstract
I study the increasing focus of CEO compensation on subjective performance measures during
the recent decade. I document that 63% of large US public firms use subjective measures to evaluate
CEO performance, and that reliance on subjective measures is positively correlated with
long-term institutional ownership. Using a recent law change in corporate governance, I identify
that a longer institutional investor horizon induces a higher weight on subjective measures in compensation
design. I also find that the more complex business structure a firm has, the more reliant is
CEO compensation on subjective performance measures. Overall, my findings are consistent with
a significant theme of incomplete contract theory suggesting that soft performance information can
provide effective i...[
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I study the increasing focus of CEO compensation on subjective performance measures during
the recent decade. I document that 63% of large US public firms use subjective measures to evaluate
CEO performance, and that reliance on subjective measures is positively correlated with
long-term institutional ownership. Using a recent law change in corporate governance, I identify
that a longer institutional investor horizon induces a higher weight on subjective measures in compensation
design. I also find that the more complex business structure a firm has, the more reliant is
CEO compensation on subjective performance measures. Overall, my findings are consistent with
a significant theme of incomplete contract theory suggesting that soft performance information can
provide effective incentives if the contract is provided by a long-term oriented principal.
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