Barbara J. Askren, James W. Bannister and Ellen L. Pavlik
Theoretical arguments have indicated that long‐term accounting‐based performance plans motivate executives to improve long‐run firm performance (Smith and Watts, 1982; Larcker…
Abstract
Theoretical arguments have indicated that long‐term accounting‐based performance plans motivate executives to improve long‐run firm performance (Smith and Watts, 1982; Larcker, 1983). Following conflicting empirical evidence related to the stock market reaction associated with the adoption of accounting‐based long‐run performance plans, this study seeks to gain further insight into the effect of such plans on accounting income‐based and value added‐based measures of productivity and return. The results indicate that firms adopting accounting‐based performance plans do not experience any greater gains in accounting return or productivity measures than do a set of control firms. Thus, such plans may not have the intended effect. Because performance plans are a popular method of executive incentive compensation, further research on the impact of these plans is indicated.
Ahmed Riahi‐Belkaoui and Ronald D. Picur
Outlines the valuation models of Ohlson (1995) and Feltham and Ohlson (1995), which relate share prices to accounting data, and develops a version which substitutes net value…
Abstract
Outlines the valuation models of Ohlson (1995) and Feltham and Ohlson (1995), which relate share prices to accounting data, and develops a version which substitutes net value added for earnings. Tests it on 1978‐1995 US data and shows that it is better than the conventional model at explaining price. Recommends that future capital market research should consider net value added as an alternative to earnings for wealth measurement.