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Preaching Water But Drinking Wine? Relative Performance Evaluation in International Banking

Ilić, Dragan and Pisarov, Sonja and Schmidt, Peter S.. (2015) Preaching Water But Drinking Wine? Relative Performance Evaluation in International Banking. WWZ Working Papers, 2015 (10). Basel.

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Official URL: http://edoc.unibas.ch/40778/

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Abstract

Relative performance evaluation (RPE) is, at least on paper, enjoying widespread popularity in determining the level of executive compensation. Yet existing empirical evidence of RPE is decidedly mixed. Two principal explanations are held responsible for this discord. A constructional challenge arises from intricacies of identifying the correct peers. And on a simpler note, corporate commitments to RPE could be mere exercises in empty rhetoric. We address both issues and test the use of RPE in a new sample of large international non-U.S. banks. Taken as a whole, the banks in our sample show moderate evidence consistent with RPE. We report stronger evidence once we investigate the subsample of banks that disclose the use of peers in their compensation schemes. This finding lends support to the credibility and thus informational value of RPE commitments. Digging deeper, we find that RPE usage is driven by firm size and growth options.
Faculties and Departments:06 Faculty of Business and Economics > Departement Wirtschaftswissenschaften
12 Special Collections > WWZ Publications > WWZ Discussion Papers and Working Papers
UniBasel Contributors:Ilic, Dragan
Item Type:Working Paper
Publisher:WWZ
Number of Pages:35
Note:Publication type according to Uni Basel Research Database: Internet publication
Language:English
Identification Number:
  • handle: RePEc:bsl:wpaper:2015/10
Last Modified:06 Apr 2018 06:17
Deposited On:22 Dec 2017 13:31

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