American Accounting Association 2006 Midwest Region Meeting March 30 – April 1 Chicago, Illinois

Saturday, April 1, 11:00 a.m. to 12:50 p.m.
Concurrent session 6A - Information, Cost Control and Performance (Management Accounting)

Title: Performance Incentive Plans: The Role of Earnings Persistence

Alka Arora University of Wisconsin-Whitewater

Pervaiz Alam Kent State University

ABSTRACT: The premise of this paper is that firms adopt a performance incentive plan to encourage managers to improve the permanent component of earnings by increasing the weight attached to earnings growth in the executive compensation arrangement. The study shows that the sensitivity of CEO compensation to earnings persistence increases significantly from the pre- to the post-adoption period.

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