@article{9efd345452074b419fb7ea3fe6a9fe74,
title = "Peer firms in relative performance evaluation",
abstract = "Relative performance evaluation (RPE) in chief executive officer (CEO) compensation provides insurance against external shocks and yields a more informative measure of CEO actions. I argue that empirical evidence on the use of RPE is mixed because previous studies rely on a misspecified peer group. External shocks and flexibility in responding to the shocks are functions of, for example, the firm's technology, the complexity of the organization, and the ability to access external credit, which depend on firm size. When peers are composed of similar industry-size firms, evidence is consistent with the use of RPE in CEO compensation.",
keywords = "CEO compensation, Peer group, Relative performance evaluation",
author = "Ana Albuquerque",
note = "Funding Information: I especially thank Jerry Zimmerman for his many comments and suggestions, Robert Bushman (the Referee), and Thomas Lys (the Editor). I am also grateful for comments from Mike Barclay, Gennaro Bernile, Jim Brickley, Gus DeFranco, Fabrizio Ferri, Surya Janakiraman, Philip Joos, Andrew Leone, Laura Liu, Evgeny Lyandres, Krish Menon, Michael Raith, Charles Wasley, Ross Watts, and Joanna Wu. This work has benefited from the comments of workshop participants at the Simon School of Business, the 2004 American Accounting Association Annual Meeting, Boston University, London Business School, INSEAD, University of Southern California, University of California at San Diego, Baruch College at The City University of New York, Portuguese Catholic University, and New University of Lisbon. I also thank the Portuguese Foundation for Science and Technology for financial support. This paper was previously titled “Who Are Your Peers? A Study of Relative Performance Evaluation.” This paper is based on the first chapter of my Ph.D. dissertation at the University of Rochester. All errors are my own. Copyright: Copyright 2009 Elsevier B.V., All rights reserved.",
year = "2009",
month = oct,
doi = "10.1016/j.jacceco.2009.04.001",
language = "English",
volume = "48",
pages = "69--89",
journal = "Journal of Accounting and Economics",
issn = "0165-4101",
publisher = "Elsevier B.V.",
number = "1",
}