Choosing the Precision of Performance Metrics

Autor:	Alan D. Crane, Andrew Koch, Chishen Wei
Rok vydání:	2018
Předmět:	Economics and Econometrics 050208 finance 05 social sciences Stock price Compensation (engineering) Shares outstanding Incentive Accounting 0502 economics and business Econometrics Economics Cash flow 050207 economics Constant (mathematics) Finance Stock (geology)
Zdroj:	Journal of Financial and Quantitative Analysis. 53:1911-1935
ISSN:	1756-6916 0022-1090
DOI:	10.1017/s0022109018000303
Popis:	There is a standard trade-off in compensation contracts between the provision of incentives and insurance. We hypothesize that this trade-off influences the precision with which firm performance is measured. We find that firm outcomes are measured less precisely when chance plays a large role in these outcomes. Further, this precision is determined through the choice of shares outstanding. This has several novel implications. Nominal stock prices can remain constant over time, and firms with unpredictable cash flows should have more shares and lower stock price levels, all else equal. We find evidence consistent with these implications.
Databáze:	OpenAIRE
Externí odkaz:	https://explore.openaire.eu/search/publication?articleId=doi_________::e85e68b535ccdc10963db74755791dbf https://doi.org/10.1017/s0022109018000303 Zobrazit plný text záznamu Plný text ve formátu PDF