Analyst Forecasts and Target Setting in Executive Annual Bonus Contracts
Whereas practitioners often recommend that firms incorporate forward-looking information in setting executive performance targets, academic studies have mainly focused on past information (e.g., past performance) as information sources. Using analysts' annual earnings forecasts as the main prox...
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| Veröffentlicht in: | Journal of management accounting research 2021-06, Vol.33 (2), p.19-42 |
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| creator | Choi, Sunhwa Kim, Sunyoung Kwon, Sewon Shin, Jae Yong |
| description | Whereas practitioners often recommend that firms incorporate forward-looking information in setting executive performance targets, academic studies have mainly focused on past information (e.g., past performance) as information sources. Using analysts' annual earnings forecasts as the main proxy for market-based forward-looking information, we find evidence that boards of S&P 1500 firms exploit forward-looking information in setting targets for executive annual bonus contracts. Furthermore, we find that the positive association between analyst forecasts and firms' bonus target revisions is more pronounced when forecasts are more informative about future firm performance and when they are less likely to be influenced by managers. Our results are robust to a battery of sensitivity tests.
Data Availability: Data are available from the public sources indicated in the text. |
| doi_str_mv | 10.2308/jmar-18-075 |
| format | Article |
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| identifier | ISSN: 1049-2127 |
| ispartof | Journal of management accounting research, 2021-06, Vol.33 (2), p.19-42 |
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| language | eng |
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| source | Business Source Complete |
| subjects | Analysts Bonuses Executive compensation Financial performance Financial reporting Forecasts Management accounting Stock exchanges |
| title | Analyst Forecasts and Target Setting in Executive Annual Bonus Contracts |
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