ABSTRACT

This study examines whether the use of non-financial performance measures (NFPMs) in chief executive officer (CEO) compensation contracts is related to stock price crash risk. The literature on NFPMs suggests that incorporating NFPMs into executive compensation contracts motivates managers to engage less in short-term oriented behaviors such as earnings management, while the literature on crash risk focuses on short-term oriented behaviors, such as bad news hoarding, as the main cause for stock price crashes. Based largely on these literatures, we predict that the use of NFPMs in CEO compensation contracts reduces managers’ tendency to hide bad news primarily by over-estimating accruals, thereby leading to a decline in future crash risk. Consistent with this prediction, we find a negative association between the use of NFPMs and subsequent crash risk. Overall, this study enhances our understanding of stock price implications of incorporating NFPMs into CEO compensation contracts.

摘要

本研究检验了在首席执行官 (CEO) 薪酬合同中使用非财务绩效指标 (NFPM) 是否与股价崩盘风险有关。有关 NFPM 的文献表明，将 NFPM 纳入高管薪酬合同会促使管理者减少盈余管理等短期行为，而有关崩溃风险的文献则侧重于短期行为，例如囤积坏消息，因为股价暴跌的主要原因。主要基于这些文献，我们预测在 CEO 薪酬合同中使用 NFPM 会降低管理者主要通过高估应计利润来隐藏坏消息的倾向，从而导致未来崩溃风险的下降。与这个预测一致，我们发现 NFPM 的使用与随后的碰撞风险之间存在负相关。总的来说，这项研究增强了我们对将 NFPM 纳入 CEO 薪酬合同的股价影响的理解。