We use survey data to estimate the effect of the 2008–2009 recession on three fundamental bonus plan choices. We find robust evidence that the recession (i) reduced incentive strength, (ii) increased the relative incentive weight on financial performance measures, and (iii) increased the...

We examine the extent to which firms use past performance as a basis for setting earnings targets in their bonus plans and assess the implications of such targets for managerial incentives. We find that high-profitability firms commonly reduce earnings targets when their managers fail to meet...