In empirically estimating the relation between CEO compensation and accounting-based firm and peer performance, researchers often define the performance variables net of CEO compensation expense. We analytically show that a researcher's use of CEO compensation as a regression's dependent variable and as an expense in defining a regression's independent variables representing accounting-based firm and peer performance will bias the researcher's pay-for-performance and relative performance evaluation (RPE) regression coefficients. In a panel estimation of CEO compensation, we document an attenuation bias in the coefficients on net firm and net peer performance. This evidence may partially explain inferences of weak CEO incentives and limited usage of RPE in prior work. Our results imply that in CEO compensation regressions, a researcher can remove biases in inferring CEO incentives and RPE usage by using gross rather than net accounting performance variables—that is, by adding back CEO compensation expense to net accounting measures.

中文翻译：

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估计首席执行官薪酬对总会计业绩与净会计业绩的敏感性

在实证估计首席执行官薪酬与会计公司和同行绩效之间的关系时，研究人员通常定义扣除首席执行官薪酬费用后的绩效变量。我们分析表明，研究人员使用首席执行官薪酬作为回归的因变量以及定义代表会计公司和同行绩效的回归自变量的费用，将使研究人员的绩效薪酬和相对绩效评估（RPE）回归产生偏差系数。在对首席执行官薪酬的面板估计中，我们记录了公司净绩效和同行净绩效系数的衰减偏差。这一证据可能部分解释了 CEO 激励薄弱和之前工作中 RPE 使用有限的推论。我们的结果表明，在首席执行官薪酬回归中，研究人员可以通过使用总会计绩效变量而不是净会计绩效变量（即将首席执行官薪酬费用加回净会计指标）来消除推断首席执行官激励和 RPE 使用情况的偏差。