Scholarly Communications Project

Compensation Choice - The Effect on Firm Performance: An Interindustry Look at Performance Plans and Restricted Stock


Patricia Graybeal Lobingier

PhD Dissertation submitted to the Faculty of the Virginia Tech in partial fulfillment of the requirements for the degree of

Doctor of Philosophy




Dr. Robert M. Brown, Chair
Dr. Fred Richardson
Dr. Cintia Easterwood
Dr. Christine Haynes
Dr. Raman Kumar

March 24, 1997
Blacksburg, Virginia


COMPENSATION CHOICE - THE EFFECT ON FIRM PERFORMANCE: AN INTERINDUSTRY LOOK AT PERFORMANCE PLANS AND RESTRICTED STOCK Patricia Graybeal Lobingier (ABSTRACT) Public criticism of executive pay has increased significantly in recent years. Shareholders express concern that the level of pay to many executives does not match the level of increase in shareholder wealth. The government has even gotten involved in the issue by changing tax laws related to compensation and taking an interest in how compensation is recorded in financial statements. This study investigates the relationship between adoption of compensation components and improved firm performance. Specifically, performance and restricted stock plan adoptions are analyzed for nine industries. Variable change is analyzed pre and post adoption for adopters; these adopters are then compared to non-adopters and to non-adopting peers. Data were gathered from COMPUSTAT and analyzed using four statistical methods; t-tests, analysis of variance, multivariate analysis of variance and analysis of means. The study covers 20 years of adoptions and involves 335 adopting firms. Results of the study indicate that, when solely analyzing adopters, adoptions of performance or restricted stock plans improve firm performance for some industries but not for others. The study further indicates for most industry groups, the improvement experienced by adopters is not as significant as the improvement realized by the non-adopting segment of the industry. Lastly, when adopters are compared to non-adopting peers the study finds peers perform as well as or better than adopters. These results imply adoption of restricted stock plans works as intended for some industries by improving firm performance but may not improve performance to the levels reached by the industry as a whole.

List of attached files

File NameSize (Bytes)
backend.pdf62,877 Bytes
chapter1.pdf6,138 Bytes
chapter2.pdf22,204 Bytes
chapter3.pdf7,216 Bytes
chapter4.pdf69,484 Bytes
chapter5.pdf234,574 Bytes
chapter6.pdf11,824 Bytes
etd.pdf23,515 Bytes

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