Management Accounting Section Midyear Meeting

Relative Performance Evaluation, Plan Characteristics and Risk-Taking Properties

• In Event: Incentives and Compensation III

Abstract

I investigate the risk-taking properties of characteristics of plans based on
relative performance evaluation (RPE). Accounting for the endogenous nature of RPE
plans, I show that variation in payout convexity and peer group difficulty affects RPE’s
risk-taking properties considerably. As such: it is important not to lump RPE plans into
one construct when examining its implications for firm decisions.

Author

• Oscar Timmermans, Universiteit Maastricht