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Table 4 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

 

Panel B: weak-form RPE tests

 

Panel C: strong-form RPE tests

 

– Full sample

 

– Disclosure subsample

 

– Disclosure subsample

Independent variables

Industry peer group

Industry/size peer group

 

Industry peer group

Industry/size peer group

 

Industry/size peer group

Intercept

4.03**

4.13*

 

− 3.55

− 2.88

 

− 5.64

 

(0.02)

(0.08)

 

(0.31)

(0.40)

 

(0.13)

Firm stock return

0.47***

0.55***

 

0.49**

0.69***

  
 

(0.00) [3.74]

(0.00) [4.03]

 

(0.01) [4.28]

(0.00) [5.21]

  

Peer return (industry)

− 0.11

  

− 0.30

   
 

(0.56) [4.15]

  

(0.40) [5.07]

   

Peer return (industry/size)

 

− 0.32**

  

− 0.66**

  
  

(0.05) [4.70]

  

(0.02) [5.30]

  

Unsystematic firm perf

      

0.69***

       

(0.00) [1.85]

Systematic firm perf

      

0.03

       

(0.89) [2.87]

Firm size (sales)

0.36***

0.36***

 

0.69***

0.67***

 

0.67***

 

(0.00) [4.05]

(0.00) [4.04]

 

(0.00) [5.07]

(0.00) [5.08]

 

(0.00) [5.08]

Growth options

− 1.19

− 1.27

 

0.56

0.22

 

0.22

 

(0.35) [4.53]

(0.32) [4.54]

 

(0.95) [13.43]

(0.94) [13.45]

 

(0.94) [13.45]

Year dummies

Yes

Yes

 

Yes

Yes

 

Yes

Industry dummies

Yes

Yes

 

Yes

Yes

 

Yes

Country dummies

Yes

Yes

 

Yes

Yes

 

Yes

Adjusted R 2

79.14%

79.36%

 

63.27%

64.52%

 

64.52%

Number of observations

335

335

 

162

162

 

162

  1. Note: Panels A and B show OLS regression results for the equation Compit=α0+α1·FirmPerfit+α2·PeerPerfit+α3·Cit+εit. The first and third column show the results from regressing log of total CEO compensation on stock return, peer performance composed of the firms within the same industry, and control variables. The second and fourth column document regression results based on the industry/size quartiles peer group approach by Albuquerque (2009). Panel A shows the results for the full sample, and panel B reports the results for the disclosure subsample. Panel C documents OLS regression results for the equation Compit=δ0+δ1·UnsysFirmPerformanceit+δ2·SystFirmPerformanceit+δ3·Cit+eit on the subsample of disclosing banks. We regress the logarithm of CEO compensation on the unsystematic firm performance, systematic firm performance, and control variables for 162 firm-year observations over the time span 2004–2013. We use the industry/size peer group specification in order to construct a systematic performance variable. All regressions include year, industry, and country dummies. For more details on systematic and unsystematic variable construction, see the section “Empirical model”. Significance levels are two-sided and denoted as follows: 1% (), 5% (), and 10% (). The corresponding p values are reported in parentheses below each coefficient estimate. Variance inflation factors are reported in squared brackets