Business strategy, executive compensation and firm performance
type="main" xml:lang="en"> <title type="main">Abstract</title> <p>We investigate the impact of business strategy on the use of performance-linked compensation (PLC) and long-term incentive plans. We also examine the relation between strategy and compensation structure fit and performance. Using cluster and content analyses to classify a firm’s business strategy, we predict and find that product differentiation firms use a higher proportion of PLCs than cost-leadership firms. Furthermore, we find that the misfit between business strategy and compensation structure has a negative impact on performance. This study contributes to the executive compensation literature by recognizing that business strategy influences the compensation structure and that a strategy and compensation structure misfit negatively affects performance.
Year of publication: |
2014
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Authors: | Chen, Yasheng ; Jermias, Johnny |
Published in: |
Accounting and Finance. - Accounting and Finance Association of Australia and New Zealand - AFAANZ, ISSN 0810-5391. - Vol. 54.2014, 1, p. 113-134
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Publisher: |
Accounting and Finance Association of Australia and New Zealand - AFAANZ |
Saved in:
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