Peer Firms in Relative Performance Evaluation

Albuquerque, Ana M.

doi:10.2139/ssrn.1368893

Cited by 50 publications

(62 citation statements)

References 74 publications

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“…The correlation of firm stock returns with its industry peer is lower than the correlation of firm stock returns with its industry/size peer, which is consistent with previous evidence (Albuquerque 2009). The statistically significant correlation coefficients increase our confidence that that industry and industry/size peers are eligible candidates to filter out noise from the individually observed firm performance measures.…”

Section: International Banking Samplesupporting

confidence: 91%

“…We adapt the effective industry/size approach by Albuquerque (2009). RPE companies assess their CEOs' compensation levels based on performance in relation to their respective peers.…”

Section: Peer Group Compositionmentioning

confidence: 99%

“…This is not without problems. Firms within an industry are hardly homogenous in their characteristics, so simple benchmarks are not able to adequately capture common shocks (Albuquerque 2009). 20 This introduces a bias in the statistical estimation and can distort inferences.…”

Section: Peer Group Compositionmentioning

confidence: 99%

“…3 For example, Gibbons and Murphy (1990), Albuquerque (2009), andBlack et al (2011) find empirical support for the in its compensation contracts. On the other hand, the probability of using RPE is decreasing with the magnitude of growth options.…”

Section: Introductionmentioning

confidence: 99%

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Preaching Water But Drinking Wine? Relative Performance Evaluation in International Banking

2015

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Relative performance evaluation (RPE) is, at least on paper, enjoying widespread popularity in determining the level of executive compensation. Yet existing empirical evidence of RPE is decidedly mixed. Two principal explanations are held responsible for this discord. A constructional challenge arises from intricacies of identifying the correct peers. And on a simpler note, corporate commitments to RPE could be mere exercises in empty rhetoric. We address both issues and test the use of RPE in a new sample of large international non-U.S. banks. Taken as a whole, the banks in our sample show moderate evidence consistent with RPE. We report stronger evidence once we investigate the subsample of banks that disclose the use of peers in their compensation schemes. This finding lends support to the credibility and thus informational value of RPE commitments. Digging deeper, we find that RPE usage is driven by firm size and growth options.

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Section: International Banking Samplesupporting

confidence: 91%

“…We adapt the effective industry/size approach by Albuquerque (2009). RPE companies assess their CEOs' compensation levels based on performance in relation to their respective peers.…”

Section: Peer Group Compositionmentioning

confidence: 99%

Section: Peer Group Compositionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Preaching Water But Drinking Wine? Relative Performance Evaluation in International Banking

2015

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“…Albuquerque (2009) argues that relevant peers are not only …rms in the same industry, but also those of similar size. When de…ning …rms according to both industry and size, she …nds signi…cant evidence for RPE.…”

mentioning

confidence: 99%

Executive Compensation: A Survey of Theory and Evidence

Edmans¹,

Gabaix²,

Jenter³

2017

SSRN Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. This paper reviews the theoretical and empirical literature on executive compensation. We start by presenting data on the level of CEO and other top executive pay over time and across firms, the changing composition of pay; and the strength of executive incentives. We compare pay in U.S. public firms to private and non-U.S. firms. We then critically analyze three non-exclusive explanations for what drives executive pay -shareholder value maximization by boards, rent extraction by executives, and institutional factors such as regulation, taxation, and accounting policy. We confront each hypothesis with the evidence. While shareholder value maximization is consistent with many practices that initially seem inefficient, no single explanation can account for all facts and historical trends; we highlight major gaps for future research. We discuss evidence on the effects of executive pay, highlighting recent identification strategies, and suggest policy implications grounded in theoretical and empirical research. Our survey has two main goals. First, we aim to tightly link the theoretical literature to the empirical evidence, and combine the insights contributed by all three views on the drivers of pay. Second, we aim to provide a user-friendly guide to executive compensation, presenting shareholder value theories using a simple unifying model, and discussing the challenges and methodological issues with empirical research. JEL-Codes: D310, D860, G340, M120. Terms of use: Documents in

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Relative Performancebewertung und Produktmarktwettbewerb

Asseburg

Hofmann

2009

Z Betriebswirtsch

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Zusammenfassung: Anreizsysteme auf Basis einer relativen Performancebewertung ermöglichen die Absatzentscheidungen des eigenen Managers sowie das Wettbewerbsverhalten anderer Markt--markteigenschaften auf die optimale Performancebewertung sowie die daran geknüpften Anreize. Die Modellergebnisse zeigen, dass die optimale Performancebewertung stark von Wettbewerbsform, Zeitpunkt der Absatzentscheidungen sowie Produkteigenschaften abhängt. Für empirische Vergütungsstudien liefert der Beitrag eine theoretische Fundierung für das Bilden branchenbezogener Vergleichsgruppen. Für die Unternehmenspraxis folgt, dass die jeweils zweckmäßige Performancebewertung erheblich von Unternehmens-sowie Brancheneigenschaften bestimmt wird Schlüsselwörter: Anreizsysteme · Produktmarkt · Relative Performancemessung D86 · L13 · M40 Zf B (

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Peer Firms in Relative Performance Evaluation

Cited by 50 publications

References 74 publications

Preaching Water But Drinking Wine? Relative Performance Evaluation in International Banking

Preaching Water But Drinking Wine? Relative Performance Evaluation in International Banking

Executive Compensation: A Survey of Theory and Evidence

Relative Performancebewertung und Produktmarktwettbewerb

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