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Does it pay to ‘Be Like Mike’? Aspiratonal peer firms and relative performance evaluation

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journal contribution
posted on 2024-03-04, 22:50 authored by Ryan T Ball, Jonathan Bonham, Thomas Hemmer

 

We examine the manner and extent to which firms evaluate performance relative to aspirational peer firms. Guided by the predictions of an agency model, we find that CEO compensation increases in the correlation between own and aspirational peer firm performances. In addition, we define and test conditions where aggregate peer performance, which has been the primary focus of prior relative performance evaluation studies of competitive peers, is expected to have an association with CEOcompensation. These conditions are supported by our empirical results. Finally, we document that our results are more pronounced when the firm-peer relationship isone-way and the peer firm is in a different industry and therefore is more aspirational.

History

Citation

Ball, R. T., Bonham, J.Hemmer, T. (2020). Does it pay to ‘Be Like Mike’? Aspiratonal peer firms and relative performance evaluation. Review of Accounting Studies, 25(4), 1507-1541. https://doi.org/10.1007/s11142-020-09540-1

Publisher

Springer Nature

Language

  • en

issn

1380-6653