...Chung-Yu Hung; Zhenyang Shi ABSTRACT Although relative performance evaluation (RPE) represents an important compensation practice, selecting a relevant peer firm poses a challenge for compensation committees. We study the implications of a committee’s peer-specific knowledge for the peer group...

...Thomas Hemmer ABSTRACT The theoretical prediction of a negative coefficient on positively correlated peer performance underlies much of the empirical literature on relative performance evaluation. This prediction is commonly obtained from a single period model where the variance–covariance matrix...

...Thomas R. Kubick; Courtney E. Yazzie ABSTRACT Relative performance evaluation (RPE) is a common practice in compensation contracting, essentially conditioning management compensation on the achievement of certain performance goals relative to a benchmark. In this paper, we examine the incentive...

...Katharine D. Drake; Melissa A. Martin ABSTRACT The effectiveness of relative performance evaluation (RPE) in compensation contracts depends on a firm's ability to identify peers that are subject to similar exogenous shocks with similar abilities to respond to such shocks. We expand the RPE...

...Martin G. H. Wu ABSTRACT In this study, I consider a company's optimal use of relative performance evaluation (RPE) in principal/agent relations to filter out common risk. I construct a risk-parity aggregate of the company's peer group to be the sum of the ratios of the common...