Investment opportunities and the structure of executive compensation

@article{Baber1996InvestmentOA,
  title={Investment opportunities and the structure of executive compensation},
  author={William R. Baber and S. Janakiraman and Sok-Hyon Kang},
  journal={Journal of Accounting and Economics},
  year={1996},
  volume={21},
  pages={297-318}
}
  • William R. Baber, S. Janakiraman, Sok-Hyon Kang
  • Published 1996
  • Business
  • Journal of Accounting and Economics
  • We extend the contracting paradigm advanced in Smith and Watts (1992) to consider cross-sectional associations between investment opportunities and the sensitivity of CEO compensation to performance measures. We predict stronger associations between compensation and performance for firms with greater investment opportunities. We also predict greater use of market-based, rather than accounting-based, performance indicators as a basis for incentive payments when investment opportunities are… CONTINUE READING
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