Abstract
Using car dealership data, we examine the relevance of forward-looking (FL) and contemporaneous (CO) measures for pay-for-performance incentives (bonus, annual raise, promotions) for long-horizon employees. Economic models suggest that while contracts with FL performance measures mitigates the shortsighted efforts of employees whose employment horizons are not aligned with the firm's profitability horizons, these measures have no influence on effort as employment horizons approach the firm's long-term profitability horizon. We predict and show for long-horizon employees that: their incentive contracts weights FL measures significantly more and are assigned greater weights than CO measures; and, compared to CO measures, the weights on FL measures increase as the time horizon of the incentives increase (bonus to raise to promotion).
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
