Three Essays on Executive Compensation - KOPS - Universität ...

Which Pay for what Performance? Evidence from Executive
Compensation in Germany and the United States
Table 2.8: Cash Bonuses and Firm Characteristics, 2005-2009
Dependent Variable
Cash Bonus
Firm Size
Firm Risk
Germany U.S. Germany U.S.
Stock Return -12.19 25.43* 4.26 282.15***
(-1.08) (1.85) (0.23) (8.87)
Stock Return x Rank(·) - 240.01*** - -209.39***
(6.11) (-4.86)
Rank(·) - - - 51.66
(1.08)
EBIT 3.44*** 1.1541*** 0.8700*** 0.9806***
(3.72) (6.83) (3.40) (7.26)
EBIT x Rank(·) - -1.0456*** -0.7844*** -0.8599***
(-5.67) (-2.73) (-5.85 )
Rank(·) - - 589.50 88.27
(1.10) (0.92)
EBIT x LARGE -3.27*** - - -
(-3.54)
Sales Growth 31.73* 218.10*** -519.52** 530.16***
(1.94) (4.93) (-2.40) (5.33)
Sales Growth x Rank(·) - 173.83* 728.55*** -519.55*
(1.67) (2.69) (-1.78)
Rank(·) - 505.41*** -243.19* 113.88
(5.12) (-1.90) (1.00)
Sales Growth x LARGE 52.70 - - -
(0.99)
LARGE 73.19 - - -
(1.59)
CEO 225.43** 369.92*** 450.17*** 420.79***
(2.54) (8.92) (2.83) (8.33)
Total Assets - - 0.0012 -0.0010
(0.91) (-0.18)
Year Effects yes yes yes yes
Individual Effects yes yes yes yes
Observations 2,404 25,515 1,458 21,130
Estimates are based on a panel regression with executive fixed effects and year dummies.
The dependent variable is cash bonuses paid at the end of fiscal year t and measured
in thousands of 2005 Euros (U.S. Dollars) for German (U.S.) firms. Stock returns are
calculated as the stock market value at the end of the fiscal year divided by the stock
market value at the beginning of the fiscal year. EBIT are total firm earnings before
interest and taxes in millions of 2005 Euros (U.S. Dollars). Sales growth is calculated as
sales at the end of the fiscal year divided by sales of the preceding fiscal year. LARGE is
a dummy variable equal to one if a firm is in the upper half of the firm size distribution.
In column 2, Rank(·) is the rank of firm size (measured by total assets) divided by the
number of observations. In columns 3 and 4, Rank(·) is the rank of the stock return
variance, EBIT variance or sales growth variance, respectively, divided by the number
of observations. The variance of EBIT and sales growth is calculated based on annual
data over ten years preceding the beginning of fiscal year t. The variance of stock
returns is calculated based on monthly data over three years preceding the beginning of
fiscal year t. All numbers are adjusted for inflation. T-values are given in parentheses.
Standard errors are corrected for heteroscedasticity and clustering at the executive level.
Significance levels of 1, 5 and 10 percent are indicated by ***, ** and *, respectively.
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