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RE-EXAMINING THE ROLE OF ACCOUNTING INFORMATION IN CEO COMPENSATION CONTRACTS: EVIDENCE FROM FOREIGN AND DOMESTIC INCOME.

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    • Abstract:
      Prior literature shows that accounting-based performance measures are important in the design of CEO compensation contracts but that their role has declined over time. We re-examine the use of accounting information by considering foreign and domestic income separately, rather than total firm income that is used in earlier studies. We show that foreign income has a greater impact on CEO compensation than domestic income and, more importantly, this differential effect has increased over time. Specifically, the impact of a 1% increase in foreign income on CEO total compensation has increased by 76% between 1985 and 2018 while the impact of domestic income on CEO compensation has not changed significantly. This study not only provides evidence that foreign income has become increasingly important in CEO compensation contracts over time but also illustrates the need to look at accounting information component by component rather than exclusively in an aggregate form. [ABSTRACT FROM AUTHOR]
    • Abstract:
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