Analyst forecasts and target setting in executive annual bonus contracts

Sunhwa Choi, Sunyoung Kim, Sewon Kwon, Jae Yong Shin

Research output: Contribution to journalArticlepeer-review

6 Scopus citations


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’ 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’ 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.

Original languageEnglish
Pages (from-to)19-42
Number of pages24
JournalJournal of Management Accounting Research
Issue number2
StatePublished - 1 Jun 2021

Bibliographical note

Publisher Copyright:
© 2021, American Accounting Association. All rights reserved.


  • Analyst forecasts
  • Annual bonuses
  • Executive compensation
  • Forward-looking information
  • Performance targets


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