Influenced by their compensation plans, CEOs make their own luck through decisions that affect future firm risk. After adopting a relative performance evaluation (RPE) plan, total and idiosyncratic risk are higher, and the correlation between firm and industry performance is lower. The opposite...

In this paper, I examine the complementarity of performance measurement, performance pay for production workers, and delegation of decisions to production workers in German manufacturing. I argue and find that combining the three management practices yields higher financial performance than the...

We conduct a field experiment studying how financial incentives for achieving specific course grades affect university students, whether effects vary by ability, and whether allowing students to choose their goals improves outcomes. We find that incentives negatively affect performance,...

Baker (2002) has demonstrated theoretically that the quality of performance measures used in compensation contracts hinges on two characteristics: noise and distortion. These criteria, though, will only be useful in practice as long as the noise and distortion of a performance measure can be...

I analyze the use of alternative performance measures using an agency model that incorporates both formal and informal agreements. I show that under the proper combination of verifiable and unverifiable performance measures, the two types of contract complement each other regardless of the...

This paper models two key roles of subjective performance evaluations: their incentive role and their feedback role. The paper shows that the feedback role makes subjective pay feasible even without repeated interaction, as long as there exists some verifiable measure of performance. It also...

This paper analyzes the use of alternative performance measures in an agency model in which contracting incorporates both formal and informal agreements. It is shown that under a proper use of verifiable and unverifiable performance measures, the two types of contracts are complements,...

This study addresses the factors that determine the intensity of pay for performance schemes. The results indicate that the use of individual and group incentives boost intensity, whereas plant or firm pay for performance do not seem to affect the variable of interest. In addition, the adoption...

In this paper, we analyze the impact of organizational structure on incentives within a LEN-framework with agents on three hierarchical levels (bottom, middle, top), where the performance measures used for incentive design originate at the bottom-level. Previous literature has shown that with...