Research indicates that there is a positive association between
accounting earnings and chief executive officer (CEO) cash compensation;
however, evidence also suggests that this positive
association ceases to exist when earnings performance is poor
or declining. This latter result has led some critics of corporate
compensation policies to conclude that CEOs are not penalized
for poor or declining firm performance. The purpose of this study
is to further illuminate the pay-performance debate by expanding
the traditional executive bonus compensation model to include a
set of accounting fundamentals that prior research indicates are
related to both current and future firm performance. Our results
indicate that there is a highly significant relationship between
accounting fundamentals and the level of and change in CEO
bonus compensation. Moreover, we find a highly significant relationship
between accounting fundamentals and both bonus omissions
and bonus reductions. When earnings are negative or
declining, we find that the above relationships remain intact. In
contrast, when earnings are negative or declining, we find that
the relationship between aggregate earnings and bonus compensation
is weak or insignificant in most of our analyses. Taken
together, our results suggest that the apparently weak relationship
between accounting earnings and CEO bonus compensation
(particularly when earnings are negative or declining) is partly
due to the fact that the bonus compensation model excludes
accounting fundamentals which are strongly associated with
bonus compensation. Thus, we conclude that (i) bonus compensation
is more closely tied to firm performance than critics sometimes
claim and (ii) bonus compensation awarded to CEOs when
earnings performance is poor is at least partially explained by the
presence of favorable accounting fundamentals.
尽快吧。。。很急很急。。。