The role of operating efficiency and asset productivity in relative performance evaluation and CEO compensation in Indian firms

DECISION ◽  
2016 ◽  
Vol 43 (3) ◽  
pp. 201-221 ◽  
Author(s):  
Sudhir Kumar Jaiswal ◽  
Asish Kumar Bhattacharyya
Keyword(s):  
Performance Evaluation ◽  
Ceo Compensation ◽  
Relative Performance ◽  
Operating Efficiency ◽  
Relative Performance Evaluation

Product Market Peers and Relative Performance Evaluation

2020 ◽  
Author(s):  
Sudarshan Jayaraman ◽  
Todd Milbourn ◽  
Florian Peters ◽  
Hojun Seo
Keyword(s):  
Performance Evaluation ◽  
Stock Returns ◽  
Product Market ◽  
Relative Performance ◽  
Relative Performance Evaluation ◽  
Common Shocks ◽  
Ceo Pay ◽  
Forced Turnover ◽  
Definition Of

We investigate the role of Relative Performance Evaluation (RPE) theory in CEO pay and turnover using a product similarity-based definition of peers (Hoberg and Phillips 2016). RPE predicts that firms filter out common shocks (i.e., those affecting the firm and its peers) while evaluating CEO performance and that the extent of filtering increases with the number of peers. Despite the intuitive appeal of the theory, previous tests of RPE find weak and inconsistent evidence, which we argue is due to the imprecise categorization of peers. Using product market peers, we find three pieces of evidence consistent with RPE in relation to CEO pay and forced turnover: (i) on average, firms partially filter out common shocks to stock returns, (ii) the extent of filtering increases with the number of peers, and (iii) firms completely filter out common shocks in the presence of a large number of peers.

Implementing Relative Performance Evaluation: The Role of Life Cycle Peers

2019 ◽  
Vol 32 (2) ◽  
pp. 107-135
Author(s):  
Katharine D. Drake ◽  
Melissa A. Martin
Keyword(s):  
Performance Evaluation ◽  
Life Cycle ◽  
Peer Group ◽  
Life Cycle Stage ◽  
Relative Performance ◽  
Data Availability ◽  
Relative Performance Evaluation ◽  
Peer Selection ◽  
Exogenous Shocks

ABSTRACT The effectiveness of relative performance evaluation (RPE) in compensation contracts depends on a firm's ability to identify peers that are subject to similar exogenous shocks with similar abilities to respond to such shocks. We expand the RPE literature by considering whether firms routinely select peers sharing a life cycle stage in RPE implementation. We argue that life cycle captures similarities in underlying economics and homogeneity along a number of dimensions relevant in filtering systematic performance. Using explicit peer firm disclosures and a peer selection model, we show that firms routinely select life cycle peers. Further, using implicit RPE tests, we document evidence of life cycle peers filtering common performance incremental to previously identified peer groups. We provide some of the first evidence that peer group composition differs with differing characteristics of the firm and its industry, highlighting that peer selection is a dynamic process evolving with the firm's changing nature. JEL Classifications: E32; J33; L2. Data Availability: All data are available from public sources.

scholarly journals Relative Performance Evaluation in CEO Compensation: A Talent-Retention Explanation

2019 ◽  
Vol 55 (7) ◽  
pp. 2099-2123 ◽  
Author(s):  
David De Angelis ◽  
Yaniv Grinstein
Keyword(s):  
Performance Evaluation ◽  
Ceo Compensation ◽  
Chief Executive ◽  
Relative Performance ◽  
Retirement Age ◽  
Relative Performance Evaluation ◽  
Compensation Contracts ◽  
Talent Retention ◽  
Ceo Talent ◽  
Commitment Device

Relative performance evaluation (RPE) in chief executive officer (CEO) compensation can be used as a commitment device to pay CEOs for their revealed relative talent. We find evidence consistent with the talent-retention hypothesis, using two different approaches. First, we examine the RPE terms in compensation contracts and document features that are consistent with retention motives. Second, using a novel empirical specification for detecting RPE, we find RPE is less prevalent when CEO talent is less transferrable: Among specialist CEOs, founder CEOs, and retirement-age CEOs, as well as in industries and states where the market for CEO talent is more restrictive.

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