Executive bonus target ratcheting: evidence from the new executive compensation disclosure rules

Sunyoung Kim, Jae Yong Shin

Research output: Contribution to journalArticleResearchpeer-review

4 Citations (Scopus)

Abstract

This study investigates whether firms revise executive bonus compensation targets based on past performance. Studies in this area suffer from a lack of detailed information related to executive performance targets. Using mandatory disclosures of executive compensation information under the U.S. Securities and Exchange Commission's new disclosure rules, this study provides the first large-sample evidence of bonus target ratcheting. There are three major findings: (i) executive bonus targets ratchet and they ratchet asymmetrically; (ii) the degree of target ratcheting and ratcheting asymmetry vary with executive equity incentives and investment opportunities; and (iii) performance relative to bonus target is serially correlated.

Original languageEnglish
Pages (from-to)1843-1879
Number of pages37
JournalContemporary Accounting Research
Volume34
Issue number4
DOIs
Publication statusPublished - 1 Dec 2017

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