Keywords: CEO compensation, accounting-based performance, market-based performance, SMEs
Entrepreneurial rewards and economic performance: an empirical study of the best small companies
This study attempts to examine a different spectrum of CEO compensation and economic performance in small- and medium-sized firms in America. Particularly, this study explores the directions and magnitudes of the relationships between compensation variables (cash-based short-term vs. long-term compensation) and economic performance (accounting- and market-based performance) after controlling for other interacting factors like CEO tenure, CEO stock ownership, and industry type. The researchers find that CEOs compensation in small- and medium-sized firms, in different types of industries, is positively linked to those firms' economic performance, particularly with respect to market-based performance. With respect to the control variables, only the CEO's stock ownership shows a significantly positive sign in determining the CEO's compensation.