Why do firms disclose performance compensation targets?

This paper analyzes the decision to disclose performance compensation targets that contain information about future profitability. I test the effect of factors expected to influence the decision to provide other expectation disclosures, e.g. management forecasts, as well as that of factors particular to the compensation setting. Results suggest that financial reporting concerns (as measured in Carter et al., 2007) along with pressure from the SEC influence performance target disclosure, and that the influence changes with the availability of management forecasts. I further test determinants of the level of performance target relative to a management forecast. I show institutional ownership is associated with higher performance targets relative to forecasts, while neither excess compensation, SEC pressure, nor financial reporting incentives appear to influence this difference.

Department dc:contributor.department

Sloan School of Management.

Grantor dc:publisher

Massachusetts Institute of Technology

Year dc:date.issued

2016

Author dc:creator

• Packard, Heidi A

Advisor dc:contributor.advisor

• John E. Core.

• Sloan School of Management.

Statement dc:rights

• M.I.T. theses are protected by copyright. They may be viewed from this source for any purpose, but reproduction or distribution in any format is prohibited without written permission. See provided URL for inquiries about permission.

Licence dc:rights.uri

• http://dspace.mit.edu/handle/1721.1/7582

Language dc:language.iso

eng

Handle dc:identifier.uri

http://hdl.handle.net/1721.1/105077

OAI identifier oai:identifier

oai:dspace.mit.edu:1721.1/105077