Jul 30th, 10:15 AM - 11:15 AM
Executive Compensation and Firm Performance: An investigation of the US hotel industry
Executive compensation is an important part of ensuring the success of any firm. However, if the interests of the management are not aligned with the firm’s interests’, returns to equity holders can suffer. We posit that cash based compensation is related to accounting based performance measures and stock based compensation is related to stock return performance. Results presented suggest a strong and significant relationship between cash compensation and two measures of accounting performance, ROA and Tobin’s Q. However, contrary to popularly held view that stock based compensation is given to executives to increase stock returns, we do not find a significant relationship. This suggests that different types of compensation methods will have to be investigated to increase stock returns.