Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/286722 
Year of Publication: 
2021
Citation: 
[Journal:] Empirical Economics [ISSN:] 1435-8921 [Volume:] 62 [Issue:] 1 [Publisher:] Springer [Place:] Berlin, Heidelberg [Year:] 2021 [Pages:] 157-186
Publisher: 
Springer, Berlin, Heidelberg
Abstract: 
The aim of executive compensation plans is to incentivize executives to maximize long-term firm value. Past research shows that executives’ pay is determined by short-term stock performance to a substantial degree. This paper tests for distributional differences in the time horizon of the performance–pay relation, controlling for executive-firm fixed effects in a quantile regression framework. I identify short-term and long-term firm and industry performance using a filter and estimate distributional differences in the short-term and long-term performance–pay relation using method of moments–quantile regression (Machado and Santos Silva in J Econ 213:145–173, 2019). I find the right tail of the conditional total compensation distribution has a more long-term-oriented performance–pay relation than the left tail. By contrast, the right tail of the conditional accumulated wealth distribution has more short-term-oriented performance–pay relation than the left tail. Results show that asymmetry in short-term firm performance–pay relations may exist, but do not vary across the conditional distribution.
Subjects: 
Executive compensation
Method of moments–quantile regression
Quantile regressions
Short-termism
Time horizon
Benchmarking
Top wage distribution
JEL: 
M12
M52
C23
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article
Document Version: 
Published Version

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