This study examines how CEO characteristics influence the decision to use non-financial performance measures (NFPM) in compensation contracts. Specifically, I examine the CEO characteristics: gender, age, tenure, risk-aversion, overconfidence, and sensitivity of wealth. Using trait theory and the extant literature examining NFPM, females, age, tenure, and risk-aversion are expected to be positively associated with the use of NFPM while competing hypotheses are presented for overconfidence and sensitivity of wealth. Employing a two-way fixed effects method, controlling for fixed effects at the firm and year level, I find that female CEOs are positively associated with the use of NFPM because of increased risk-aversion. The short-term horizon perspective of younger and older CEOs lead to less preference for NFPM. Increasing tenure is associated with the power to self-select into contracts that include NFPM. Moreover, tenure is incrementally more important than age and gender. The results for overconfidence are inconclusive. Finally, risk-aversion and sensitivity of wealth are both positively associated with weight of NFPM. The results of this study further the understanding for the use of NFPM and provide information regarding the specific managerial fixed effects that influence compensation decisions.
| Identifer | oai:union.ndltd.org:vcu.edu/oai:scholarscompass.vcu.edu:etd-4723 |
| Date | 01 January 2015 |
| Creators | Simerly, Melloney C, Ph.D. |
| Publisher | VCU Scholars Compass |
| Source Sets | Virginia Commonwealth University |
| Detected Language | English |
| Type | text |
| Format | application/pdf |
| Source | Theses and Dissertations |
| Rights | © The Author |
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