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1、THEACCOUNTINGREVIEWAmericanAccountingAssociationVol.89,No.1DOI:10.2308/accr-505742014pp.2760DoGrowth-OptionFirmsUseLessRelativePerformanceEvaluation?AnaMariaAlbuquerqueBostonUniversityandCato´lica-LisbonSchoolofBusinessandEconomicsABSTRACT:Theuseofrelativeperformanceevaluation(RPE)incompensationcont
2、ractsforCEOsatgrowth-option(GO)firmsthatoperateinmorevolatileenvironmentscanprovideinsuranceagainstcommonexogenousshocksandthusreducetheamountofriskthatCEOsface.However,theimplementationofRPEforhigh-GOfirmscanbeimpairedbythesefirms’inabilitytofindapeergroupthatcapturescommonriskexposure.Thispaperstu
3、diesGOfirms’relianceonRPEandfindsthattheuseofRPEinCEOcompensationcontractsvariesnegativelywithafirm’slevelofgrowthoptions.Thetestsusethreeproxiesforgrowthoptions:themarket-to-bookvalueofassets,researchanddevelopmentexpensesscaledbyassets,andafactorobtainedfromaprincipalcomponentanalysis.Theresultsar
4、erobusttocontrollingfortheimpactofotherfirmcharacteristicsonpay-for-performancesensitivities.Keywords:relativeperformanceevaluation;CEOcompensation;growthoptions.DataAvailability:Alldataareobtainedfrompubliclyavailablesources.I.INTRODUCTIONhiefexecutiveofficers(CEOs)offirmswithmoregrowthopportunitiest
5、endtooperateinCmorevolatileenvironments.Theuseofrelativeperformanceevaluation(RPE)incompensationcontractsforCEOsofgrowth-option(GO)firmscanprovideinsuranceagainstcommonexogenousshockstofirmperformanceandthusreducetheamountofriskthatCEOsface.However,thesefirmsuseofRPEalsocanbeconstrainedbythehighcostsas
6、sociatedwithRPEimplementation.TheextentofRPEusageforhigh-GOfirmsisanempiricalquestionandthefocusofthispaper.IespeciallythankJohnHarryEvansIII(senioreditor)andtwoanonymousreferees,aswellasJimBrickley,KrishMenon,RossWatts,andJerryZimmermanformanyhelpfulcommentsandsuggestions.Iamalsogratefulforcommentsf
7、romRuiAlbuquerque,MaryEllenCarter,Lei(Tony)Chen,LizDemers,FabrizioFerri,AndyLeone,PhilipJoos,ClaudineMangen,MichaelRaith,EddieRiedl,NathanStuart,JoannaWu,TinaZamora,seminarparticipantsatBostonUniversi
