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THE DESIGN OF BONUSES AND ITS IMPLICATIONS FOR INVESTMENT CHOICES
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Annita Florou 
Abstract
In the wake of Enron and other high profile corporate scandals executive compensation has become a key strategic issue for market participants and regulators all around the world. This paper readdresses a very significant, and often controversial issue, namely the impact of managerial bonuses on corporate investment decisions. In doing so, it critically examines two related sets of hypotheses, the “fixed-target” and “ratcheting-target” hypotheses. The comparison of the above predictions reveals a contradiction, which in turn consists a subject of future empirical research.
Keywords: Executive Compensation, Bonus, Positive Accounting Theory, Ratchet-Principle
How to cite this paper: Florou, A. (2003). The design of bonuses and its implications for investment choices. Corporate Ownership & Control, 1(2), 150-155. https://doi.org/10.22495/cocv1i2p12
