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...

We analyze earnings forecasts retrieved from the I/B/E/S database concerning 596 firms for the sample 1995 to 2011, with a specific focus on whether these earnings forecasts can be predicted from available data. Our main result is that earnings forecasts can be predicted quite accurately using...

In this paper, we test empirically whether there is a relationship between corporate income taxes and CEO bonus payments. Using Compustat and ExecuComp data from 1992 to 2010, we find mixed results. Looking at the whole sample, the average bonus contract rewards tax savings excessively in...

An analysis of about 300000 earnings forecasts, created by 18000 individual forecasters for earnings of over 300 S&P listed firms, shows that these forecasts are predictable to a large extent using a statistical model that includes publicly available information. When we focus on the...

Earnings forecasts can be useful for investment decisions. Research on earnings forecasts has focused on forecast performance in relation to firm characteristics, on categorizing the analysts into groups with similar behaviour and on the effect of an earnings announcement by thefirm on future...

This paper reports the results of an individual real effort laboratory experiment where subjects are paid for measured performance. Measured performance equals actual performance plus noise. We compare a stable environment where the noise is small with a volatile environment where the noise is...

Alphabetic name ordering on multi-authored academic papers_new, which is the convention in theeconomics discipline and various other disciplines, is to the advantage of people whose lastname initials are placed early in the alphabet. As it turns out, Professor A, who has been afirst author more...

We conduct a field experiment in a large retail chain to test basic predictions of tournament theory regarding prize spread and noise. A random subset of the 208 stores participates in two-stage elimination tournaments. Tournaments differ in the distribution of prize money across winners of the...

Recent research reveals that hedge fund returns exhibit a range of different,possibly non-linear pay-off patterns. It is difficult to qualify all these patternssimultaneously as being rational in a traditional framework for optimal financial decisionmaking. In this paper we present a simple...

This discussion paper resulted in a publication in the 'Journal of Economics and Management Strategy', forthcoming.<P> Distorted performance measures in compensation contracts elicit suboptimal behavioral responses that may even prove to be dysfunctional (gaming). This paper applies the empirical...</p>