Compensation Choice - The Effect on Firm Performance: An Interindustry Look at Performance Plans and Restricted Stock

Public criticism of executive pay has increased significantly in recent years. Shareholders express concern that the level of pay to many executives does not match the level of increase in shareholder wealth. The government has even gotten involved in the issue by changing tax laws related to compensation and taking an interest in how compensation is recorded in financial statements. This study investigates the relationship between adoption of compensation components and improved firm performance. Specifically, performance and restricted stock plan adoptions are analyzed for nine industries. Variable change is analyzed pre and post adoption for adopters; these adopters are then compared to non-adopters and to non-adopting peers. Data were gathered from COMPUSTAT and analyzed using four statistical methods; ttests, analysis of variance, multivariate analysis of variance and analysis of means. The study covers 20 years of adoptions and involves 335 adopting firms. Results of the study indicate that, when solely analyzing adopters, adoptions of performance or restricted stock plans improve firm performance for some industries but not for others. The study further indicates for most industry groups, the improvement experienced by adopters is not as significant as the improvement realized by the non-adopting segment of the industry. Lastly, when adopters are compared to non-adopting peers the study finds peers perform as well as or better than adopters. These results imply adoption of restricted stock plans works as intended for some industries by improving firm performance but may not improve performance to the levels reached by the industry as a whole.

Name thesis:degree_name

Ph. D.

Level thesis:degree_level

doctoral

Discipline thesis:degree_discipline

Business (Accounting)

Department dc:contributor.department

Business (Accounting)

Grantor dc:publisher

Virginia Tech

Year dc:date.issued

1997

Author dc:creator

• Lobingier, Patricia Graybeal

Chair dc:contributor.committeechair

• Brown, Robert M.

Committee members dc:contributor.committeemember

• Kumar, Raman
• Haynes, Christine M.
• Easterwood, Cintia M.
• Richardson, Frederick M.

• performance plans
• restricted stock
• executive compensation

Statement dc:rights

• In Copyright

Licence dc:rights.uri

• http://rightsstatements.org/vocab/InC/1.0/

Dc Identifier Other

etd-5312182239721111

OAI identifier oai:identifier

oai:vtechworks.lib.vt.edu:10919/30589