Prior research shows that firms generating earnings growth by improving profitability create shareholder value, while firms generating earnings growth through investment destroy value. This paper examines whether compensation committees consider this while determining CEO compensation. We first...

Prior research has shown that firms who generate earnings growth by improving profitability create value for shareholders, while firms who generate earnings growth through investment destroy value. This paper examines whether compensation committees take this into account while determining CEO...

This paper examines whether "you get what you pay for" in firms that implement residual income (RI)-based compensation. Specifically, this paper explores differences in investment patterns of firms that implement RI-based compensation plans conditional on whether the firms switched from earnings...

SUBJECT AREAS: Capital budgeting, Cash flow, ERP, Forecasting, Investments, Present valueCASE SETTINGS: Italy; Appliance industry; 1999This case presents a capital budgeting problem. Whirlpool Europe is evaluating an investment in an enterprise resource planning (ERP) system that would...

We examine changes in executive compensation that firms make in response to underwater options. Using a sample of firms with underwater options in 2000, we estimate that 81% of firms to take action to respond to underwater options. We examine explanations for firms' responses. Opponents argue...