Performance Plan Adoption and Corporate Performance
Abstract
Performance plans, a form of executive compensation plan, are designed to reward management for improved performance over the long run. Various accounting measures can be used to evaluate this performance: return on assets (ROA), return on equity (ROE), and earnings per share (EPS) are examples. This study employs these, as well as cash flow measures, on a sample of matched performance plan adopting and control firms to examine whether there is a difference in performance associated with the adoption of a plan. The results indicate that adopting firms display significantly greater growth in ROA, ROE, and working capital from operations to total assets (WCFO) than do control firms. This result continues to hold for ROE, but not ROA or WCFO, after controlling for economy‐wide growth.
Citation
Bannister, J.W., Mihalek, P.H. and Smith, C.S. (1997), "Performance Plan Adoption and Corporate Performance", Managerial Finance, Vol. 23 No. 5, pp. 28-39. https://doi.org/10.1108/eb018624
Publisher
:MCB UP Ltd
Copyright © 1997, MCB UP Limited