@article{fa686f9f02f64059905b5808e49123b7,
title = "Analyst forecasts and target setting in executive annual bonus contracts",
abstract = "Whereas practitioners often recommend that firms incorporate forward-looking information in setting executive performance targets, academic studies have mainly focused on past information (e.g., past performance) as information sources. Using analysts{\textquoteright} annual earnings forecasts as the main proxy for market-based forward-looking information, we find evidence that boards of S&P 1500 firms exploit forward-looking information in setting targets for executive annual bonus contracts. Furthermore, we find that the positive association between analyst forecasts and firms{\textquoteright} bonus target revisions is more pronounced when forecasts are more informative about future firm performance and when they are less likely to be influenced by managers. Our results are robust to a battery of sensitivity tests. Data Availability: Data are available from the public sources indicated in the text.",
keywords = "Analyst forecasts, Annual bonuses, Executive compensation, Forward-looking information, Performance targets",
author = "Sunhwa Choi and Sunyoung Kim and Sewon Kwon and Shin, {Jae Yong}",
note = "Funding Information: We are grateful for helpful comments from two anonymous reviewers, Tae-Sik Ahn, In Gyun Baek, Clara Xiaoling Chen, Francesca Cornelli, Jae Eun Choi, Zhaoyang Gu, Christian Hofmann, Iny Hwang, Kyung Won Kim, Woo-Jong Lee, Michal Mat{\v e}jka (editor), Tae-Young Paik, Emma Peng, Jason Schloetzer, Philip Shane, Jee Eun Shin, Seung-Weon Yoo, Dae-Hee Yoon, and participants at the 2016 Korean Accounting Association Seminar on Accounting Research, the 2016 Korean Accounting Association Annual Meeting, the 2016 Asia-Pacific Management Accounting Research Symposium (AMARS), the 2016 American Accounting Association Annual Meeting, the 2017 Management Accounting Section Midyear Meeting, and the Monash University 2017 Brown Bag Seminar. We are also grateful for the proxy statement filing date data provided by Hyunkwon (Kwon) Cho. This paper is based on Sewon Kwon{\textquoteright}s Ph.D. dissertation at Seoul National University. Sunhwa Choi appreciates support from the Institute of Management Research at Seoul National University. Funding Information: We are grateful for helpful comments from two anonymous reviewers, Tae-Sik Ahn, In Gyun Baek, Clara Xiaoling Chen, Francesca Cornelli, Jae Eun Choi, Zhaoyang Gu, Christian Hofmann, Iny Hwang, Kyung Won Kim, Woo-Jong Lee, Michal Mateˇjka (editor), Tae-Young Paik, Emma Peng, Jason Schloetzer, Philip Shane, Jee Eun Shin, Seung-Weon Yoo, Dae-Hee Yoon, and participants at the 2016 Korean Accounting Association Seminar on Accounting Research, the 2016 Korean Accounting Association Annual Meeting, the 2016 Asia-Pacific Management Accounting Research Symposium (AMARS), the 2016 American Accounting Association Annual Meeting, the 2017 Management Accounting Section Midyear Meeting, and the Monash University 2017 Brown Bag Seminar. We are also grateful for the proxy statement filing date data provided by Hyunkwon (Kwon) Cho. This paper is based on Sewon Kwon{\textquoteright}s Ph.D. dissertation at Seoul National University. Sunhwa Choi appreciates support from the Institute of Management Research at Seoul National University. Sewon Kwon is the corresponding author. Publisher Copyright: {\textcopyright} 2021, American Accounting Association. All rights reserved.",
year = "2021",
month = jun,
day = "1",
doi = "10.2308/JMAR-18-075",
language = "English",
volume = "33",
pages = "19--42",
journal = "Journal of Management Accounting Research",
issn = "1049-2127",
publisher = "American Accounting Association",
number = "2",
}