Understanding high-powered incentives in organizations

• Main Author: Zheng, Shuo, S.M. Sloan School of management
• Other Authors: Egor Matveyev.
• Format: Others
• Language: English
• Published: Massachusetts Institute of Technology 2018
• Subjects: Sloan School of Management.
• Online Access: http://hdl.handle.net/1721.1/117918

Thesis: S.M. in Management Studies, Massachusetts Institute of Technology, Sloan School of Management, 2018. === Cataloged from PDF version of thesis. === Includes bibliographical references (page 33). === I study how the compensation structure of top managers from US public companies changes in recent years and the effect of these incentives on firm performance. I first explore the trend of executive compensation structure and performance metrics used in executive compensation over the years. I also examine systematic differences across industries and different firm sizes. Then I analyze the relationship between compensation structure and firm performance. My results suggest that a higher level of incentive-based compensation correlates with higher growth in total shareholder return; particularly for small firms, a higher level of incentive-based compensation correlates with significantly higher total asset growth, sales growth and employment growth as well. To explore whether the level of incentive-based compensation has influence on firm performance, I use propensity score matching to reduce selection bias. My results suggest that the level of incentive-based compensation has no significant influence on firm performance. === by Shuo Zheng. === S.M. in Management Studies