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Swiss Journal of Economics and Statistics

Table 14 Regressions estimating the sensitivity of CEO compensation to RPE

From: Preaching water but drinking wine? Relative performance evaluation in international banking

 

Panel A: weak form RPE tests—full sample

Panel B: weak form RPE tests—disclosure subsample

Panel C: strong form RPE tests—disclosure subsample

 

Unscaled

Scaled

Unscaled

Scaled

Unscaled

scaled

Independent variables

Knor

Kcos

Kuni

Knor

Kcos

Kuni

Knor

Kcos

Kuni

Knor

Kcos

Kuni

Knor

Kcos

Kuni

Knor

Kcos

Kuni

Intercept

2.22

2.21

2.20

2.28

2.20

2.33

− 0.52

− 0.51

− 0.56

− 0.09

− 0.56

0.05

− 3.02

− 2.87

− 2.83

− 2.95

-2.83

-2.88

 

(0.12)

(0.12)

(0.12)

(0.11)

(0.12)

(0.11)

(0.85)

(0.86)

(0.85)

(0.97)

(0.85)

(0.99)

(0.32)

(0.34)

(0.36)

(0.32)

(0.36)

(0.33)

Firm stock return

0.52***

0.51***

0.51***

0.52***

0.51***

0.53***

0.75***

0.75***

0.71***

0.74***

0.71***

0.74***

      
 

(0.00)

(0.00)

(0.00)

(0.00)

(0.00)

(0.00)

(0.00)

(0.00)

(0.00)

(0.00)

(0.00)

(0.00)

 

Peer return

− 0.29

− 0.20

− 0.26

− 0.24

− 0.26

− 0.26

− 1.03**

− 0.84**

− 0.91**

− 0.82**

− 0.91**

− 0.77**

      
 

(0.17)

(0.25)

(0.23)

(0.19)

(0.23)

(0.13)

(0.02)

(0.04)

(0.05)

(0.03)

(0.05)

(0.04)

      

Unsystematic firm perf

            

0.75***

0.75***

0.71***

0.74***

0.71***

0.74***

             

(0.00)

(0.00)

(0.00)

(0.00)

(0.00)

(0.00)

Systematic firm perf

            

− 0.04

− 0.01

0.00

− 0.03

0.00

-0.01

             

(0.85)

(0.97)

(1.00)

(0.91)

(1.00)

(0.96)

Control variables

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

yes

yes

yes

Year dummies

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

yes

yes

yes

Industry dummies

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

yes

yes

yes

Country dummies

Yes

Yes

Yes

Yes

Yes

Yes

            

Adjusted R 2

79.25%

79.21%

79.23%

79.25%

79.22%

79.29%

65.16%

64.96%

64.74%

65.01%

64.74%

64.92%

65.16%

64.96%

64.74%

65.01%

64.74%

64.92%

Number of observations

335

335

335

335

335

335

162

162

162

162

162

162

162

162

162

162

162

162

  1. Note: The Table shows OLS regression results for the equation Compit=α0+α1·FirmPerfit+α2·PeerPerfit+α3·Cit+εit (weak-form RPE test). We report the results from regressing log of total CEO compensation on stock return and peer performance aggregated based on the Kernel approach and the adjusted Kernel approach. Panel A reports results for the full sample, and panel B reports results for the disclosure subsample. In addition, panel C documents OLS regression results for the equation Compit=δ0+δ1·UnsysFirmPerformanceit+δ2·SystFirmPerformanceit+δ3·Cit+eit on the subsample of RPE-disclosing banks (strong-form RPE tests). We regress logarithm of CEO compensation on unsystematic firm performance, systematic firm performance, and control variables for 162 firm-year observations over the time span 2004–2013. For more details on the systematic and unsystematic variable construction, see the “Empirical model” section. We report three versions of the Kernel based approach: (1) based on the pdf of the standard normal distribution (Knor), (2) based the pdf of the uniform distribution (Kuni), and (3) based the pdf of the “Cosine Distribution” (Kcos). The “scaled” columns denote the variants where we multiply the standardized differences with a scaling factor, as described in the “Kernel-based peer group construction” section. significance levels are two-sided and are denoted as follows: 1% (∗∗∗), 5% (∗∗), and 10% (∗). The corresponding p values are reported in parentheses below each coefficient estimate
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