The relative performance evaluation (RPE) hypothesis states that firms benefit from comparing their own performance to that of a peer group when evaluating the CEO's performance. Although in theory firms should be employing relative performance to evaluate the CEO, indirect empirical tests in the 1980s and 1990s generally fail to support the RPE hypothesis. This paper examines RPE-related disclosures found in the compensation committee reports provided in proxy statements to determine whether firms actually employ RPE, and to offer insight into why indirect tests generally fail to support the RPE hypothesis. We find that firms do use RPE in determining executive compensation, thus supporting the RPE hypothesis, although RPE usage is not widespread. We also find that several key assumptions underlying prior indirect tests are misspecified for many firms, helping to explain the difficulty in detecting RPE in random samples of firms and suggesting improvements to methodologies employing indirect tests for RPE. Our results also beg the question of why some firms use RPE while other firms do not. We find that RPE usage is positively related to greater monitoring and stakeholder concern about pay and performance, but that performance and CEO power and insulation from pressure do not explain cross-sectional variation in RPE usage. We also examine disclosures related to peer groups and adverse performance-related events since they indirectly relate to RPE and find that many firms filter out negative-performance-related events, but not positive ones. This is equivalent to using one-sided RPE, where a firm excuses the CEO from factors that affect industry performance adversely, but credits the CEO for factors that aid industry performance.
If you would like to write for this, or any other Emerald publication, then please use our Emerald for Authors service information about how to choose which publication to write for and submission guidelines are available for all. Please visit www.emeraldinsight.com/authors for more information. About Emerald www.emeraldinsight.comEmerald is a global publisher linking research and practice to the benefit of society. The company manages a portfolio of more than 290 journals and over 2,350 books and book series volumes, as well as providing an extensive range of online products and additional customer resources and services.Emerald is both COUNTER 4 and TRANSFER compliant. The organization is a partner of the Committee on Publication Ethics (COPE) and also works with Portico and the LOCKSS initiative for digital archive preservation. AbstractManagers' selection of accounting procedures and the factors that potentially influence such selections have received a large amount of attention from accounting researchers. Although managers have discretion in selecting accounting procedures, auditors have some ability to constrain management's choice. In this study we examine client firms of the auditors involved in 16 Securities and Exchange Commission (SEC) enforcement actions related to alleged audit failures reported in Accounting and Auditing Enforcement Releases and Accounting Series Releases over the period 1980-1996. We find evidence that the client firms have more income decreasing accruals during the period that their auditor is subject to an investigation related to an SEC enforcement action.
The quality of continuing medical education (CME) is frequently measured using the Moore's Level of Outcome framework, with higher-level outcomes (5 and above) perceived as more valuable than lower-level outcomes (such as Level 3-knowledge). Higher-level outcomes require more rigorous evaluation, increasing the time requirements of an interaction; however, there is a trend among adult learners towards a preference for shorter, more informal education such as microlearning. This allows for greater reach but prevents outcome evaluation to higher levels. We explored the utility of combining microlearning with more traditional eLearning formats ("microlearning programme") to increase participation while retaining the ability to measure knowledgeand competence-level outcomes. Comparing two recent programmes with similar content run previously ("comparator programmes"), we identified a slight improvement in completion of evaluation activities associated with the microlearning programme. However, the significant reach microlearning affords presents a clear need to bridge the gap between participation and evaluation. Considering these two cases, we concluded that future microlearning initiatives should incorporate evaluation at the point of education, providing a combination of microlearning and microevaluation to drive knowledge gain in a form that is measurable in terms of educational outcomes.
Relative performance evaluation, Agency theory, Compensation committee report, J33, M41, M52,
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