Corporate Performance, Stock Option Compensation, And Measurement Error In CEO Pay
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Keywords
corporate performance, stock option compensation, CEO pay, measurement error, total compensation
Abstract
Previous investigations of the association between executive pay and corporate performance have relied heavily on the sum of salary and bonus as a proxy for total compensation. This study shows that the sum of salary and bonus contains a substantial amount of unsystematic measurement error. The results underscore the need for future research in this area to use compensation proxies that incorporate executive stock options.
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