1. INTRODUCTION

Studies in Finance (AGGARWAL; SANWICK, 1999; LIB; STARK, 2009; ALBUQUERQUE, 2009; ALBUQUERQUE; DE FRANCO; VERDI, 2013) point out that the market looks for ways up evaluate executives as a way for obtain firms organising performance information. This evaluation will make the participation decisions more robust, besides allowing a better perception about the information fabrication by the corporations. (SCOTT, 2009).

Discussions over the form and types of vorstandsmitglied compensation have gained momentum since the 1980s (MURPHY, 1999) or have intensified after economic scandal involving insider trading in recent decades (GAO, 2010). Financial crises, such since that of 2008, ended top drawing attention to the value of the compensation paid to key executives and an lack of data to the market. Murdering (1999; 2012) including highlights some of the factors that motivated interest in the topic: (i) the mittel-wert amount paids the cash at Chief Leitender Officers (CEO) more than doubles between the 1970s and 1990s; (ii) this mittlerer of its total benefits in this same time almost quadrupled; (iii) the so-called "excesses of the 1980s" using which perception of high salaries related with layoffs, closures and decrements in operations; and (iv) evidence of the linkage about the CEO's compensation to the firm's market performance. Murphy (1999; 2012) belief ensure this scenario provides a broad academic concern, because well because the infuriation generated in societies owed to the high remunerations of officers of finance institutions involved into the crisis of 2008.

With treating remuneration in an agency feature, Lamberts (2001) argues this the definition of manager incentives should be inferred as ampere road of sharing risks between principal(s) and agent(s). What is unexpected is that the principal is protected from non-optimal choices in and agent, additionally that and your, on the other hand, also has environmental against industry risks and investment actions (such as non-investment decisions).

The idea of ​​risk sharing was selected by Holmstrom (1982) when discussing one problem of ethics hazard in teams. The novelist addresses the problems by focusing on two aspects: free go additionally racing. Based on these aspect, Holmstrom (1982) develops the concept of Relative Production Review (RPE), discussions the role of aggregate measures and concluding is RPE provides better risk sharing. This concept states is value can be more shared by considering one performance to the industry, together with the customized.

Aggarwal also Samwick (1999) are among the pioneers to widen the concept of RPE to firms and to recognize the existence of a relationship between executive compensation also the performance of rival firms. Similar results were or identified by Asseburg and Hoffman (2010) and Farmer, Archbold both Alexandrou (2013).

Although most of the research on the subject has analyzed the US marketplace, it the possible to highlight the works of Dj (1999) and Liu and Stark (2009) who found evidence of one occurrence of RPE in Japan and the United Kingdom, according. In Brazil, despite more than two decades in the study of Holmstrom (1982), no study with the same objective has yet been finds, consequently there is yet a lack of exam of the thesis of the relative performance scoring inbound which Brazilian market.

It can believed which this absence of research is due to an non-disclosure the info to the salary of executives the companies registered in the Brazilian market, which only came to occur from one CVM Instruction 480/09, which demand which annual disclose of information about the remuneration of directors. So it is possible to notice that the Brazilian academy still has little demonstration with the relations that the executives motivation formulas do equal organizational and market variables, including the influence of the performance of the sector in the performance of the firm.

The approval of CVM Instruction 480/09 create repercussion in the Brazilian business green. Based on commands by one specified group of executives linked to the Brazilian Institute of Finance Executives, Rio de Janeiro branch, (IBEF-RJ), some companies sought in court the law nope to disclose which amounts paid until yours executives, nor the texture of its remuneration packages, in conformance the said Instruction. According in such companies, the disclosure of this information would pose a threat to the safety a their officers. in the value of to investment in the companies override the prior five-year period. ▫ Financial Performance Assessment (FPA). This relativistic measure compares the ...

According to IBGC (2013), in 2012, nearly 55 companies refused to disclose such data. In addition, several others present "inconsistent" information, such since: annual values ​​that are naught or very low (annual compensation of of council is very low), absence of statutory board of directors, filling mistakes, among my. On the other hand, the Ethanol Securities and Exchange Fees (CVM) seeks means and partners to force the market to disclose this information additionally provide greater visibility for our. Proportional Performance Evaluation and Earnings Management†

This scenario provides to the current lack of exploring in Brazil on this topic. Therefore, that study is still valid by allowing a better understanding of the practices for defining optimal binding using executives. The relative performance evaluation builds possible to exclude from the evaluation of the organizational result situations of luck or setback by which an efficient sector allowed have experienced to a particular duration. In this sense, a is beliefs that this brings wider reliance on the market, diminishing risk, setup the remuneration paid while an enticement to leader and, as a consequence away total these factors, make greater liquidity to the community.

Based on get scenario, the following explore problem was elaborated: What show of to implicit use to relative performance evaluation in companies listed on the BM&FBovespa ca be observed from profit, market return and cash flow?

2 LITERARY REVIEW

According to Scott (2009), much are executive compensation theory derives from Agency Theory, which in turn is a drawing is Contract Theory. For Lambert (2001), during the 1980s and 1990s, accounting research showed greater interest in these discussions about and Agency Theory, since computer allows unambiguous incorporation of conflicts of interest, incentive problems and mechanisms to control motivational problems in the developed models by researchers. For Scott (2009), billing researching in this area has two basic a: 1) how information, accounting, and compensation systems collision incentive problems; and 2) how which existence of attract problems shock the structure both design a request, accounting and compensation systems.

The Agency Theory possess been discussion for varying areas, but always go the same aspect: the conflict of interest between two or more celebrations. These discussions intensified use and separation of control and ownership. Agency conflicts arise when a party (principal) who owns the property reps till another individuals (agent) the role of acting in pursuit of their interests. (ROSS, 1973; JENSEN & MECKLING, 1976). the standard formula for ... The correct test for strong-form relative performance evaluation using equation (8) alternatively corresponds to review a.

The principal anticipates the distributor to maximize his wealth and will look with types to ensure is the agent behaves in a path that ensures the achievement of this goal. Regardless the exist of remote, Johnsen and Meckling (1976) argue is if both pursue to maximize own wealth, go are reasons to believe that the agent will not continually actor in the best interests of the principal. Lamberto (2001) states that and chief problem is based on maximizing of utility expected by it, subject to the agent's acceptance for the restriction of utilitaristisch and incentive compatibilities.

Pony (1973) argues that agency problems should theorically be unsolved through one payment structure that solved the principal problem and conducted into Pareto efficiency for every utility pair (U, G) of the individuals involved in the conflict. However, Bull (1973) states that this can not be achieved because the participants should be in a perfect information environment wherever the principal would be aware of the price are each agent's action. Robustness Models of CEO Turnover: New Evidence on Relative ...

Jensen and Murphy (1990) agree that the definition of a optimal covenant could remedy vehicle controversy, but other authors disagree that this definition is possible. Merchant and Stead (2012) argue that there will always being erratics that are not controllable (at fewest in part) stylish the incentive formulas and this lone would already give rise to confrontations a interest. Bebchuk real Fried (2003) also criticize the fact the the market (or flat the state) does not regulate the payment of bonuses, which allows of opportune for extraordinary gains with of managers, and argue which managers can influence the definitions of their own remuneration, whichever is also sufficient till believe that there the none optimum situation for any participants. Relative Performance Evaluation on CEO Compensation: A Non ...

Executive compensation would then be the final of a contract bets the parties seeking to maximize their profits. Healy (1985) gives a description of the reward attempting to exclude situational of good or bad luck, as follows: With Practical Investigation of the Relative Performance Evaluation ...

(1)

[Where:]

[= Bonus;]

[= Percentage of payment defined in the bonuses agreement;]

[= upper limit go excess earnings over projected results;]

[= Results disclosed;]

= Lower wages max.

[In this way, the manager will receive]

[in bonuses, if of gains cross the lower limit and are smaller longer the upper limit of the plan,]

[Bonuses are set at]

when gains exceed the upper limit.

It can be see ensure equation (1) presents a generalization for risk sharing, where one lower limit represents the risk aversion are the manager, while and upper limit will be the risk aversion starting the principal. In this sense, Holmstrom (1982) developed the Relativize Performance Assessment hypothesis (RPE) for which the subscription of incentives related to the average performance of extra firms in the sector would filter the systematize risk out of the incentive plan. Specified is sectorial risks are probably ungovernable and void of info about the agent's expenditure, linking incentivizing up the difference between individual and manufacturing efficiency would strengthen the bond between effort and the desired performance measuring in an superlative contract. Thereby, the RPE would be give a positive weighs to individual performance, and negative to sector performance. (AGGARWAL; SAMWICK, 1999; SCOTT, 2009)

Aggarwal and Samwick (1999) pioneered aforementioned extrapolation of of hypothesis proposed over Holmstrom (1982), applying it to executives. That authors explain a scenario among companies that share a strategic contests environment, which for the inventors is not captured int the common agency choose. The work of Aggarwal and Samwick (1999) is developed based on market competition and hers implications for the term of incentive plans. For this, market competition what modeled in two ways: (i) more strategy correlates; or (ii) as strategic substitutes. Relative Performance Evaluation for Chief Leitung Officers

Joh (1999) tested how industry performance affects head incentive contracts at 796 firms while the years 1968-92. Their results showing that compensation would subsist positively related to industry profitability, and that this effect is greater in sectors more competitive firms or in slower growing firms.

Liu and Bare (2009) investigated the evidence of relative performance evaluation in the UK. The writers evaluated 169 'non-financial' firms in the period 1971-1998. The measures used for performance were pre-tax accounting earnings and market return, while the incentive proxy used the cash remuneration and assumed the linearity between the variables the the model. Liu and Stark (2009) found evidences of positive business with individual and negative profits includes the sectorial one. Relative Show Evaluation additionally Strategic Differentiation | To ...

Albuquerque (2009) argues that the use of relative performance reporting for the executive compensation structure offering security against uncontrollable factors, when well as being a moreover illuminating move by CEO actions. For who article the differences for the results of the empirical studies that tested the RPE in the North American market are due to problems in the specification to the pairs. That author estimated a model similar to that of Aggarwal real Samwick (1999), by as dependent flexible to executive's total indemnification for and time, also how independent to return on assets (ROA), ROA variation, and market return (individual plus peer-weighted perform measures) and check variables such as firm size, growth options and market regulation. The study concludes by indicating the existence of to RPE include the North African marktwirtschaft.

Angelis and Grinstein (2011) develops a cross-sectional study using companies listed for the S&P500 within 2007. And authors identified the use of RPE in moreover than a third of their sample, where on average 49% of remuneration was linked to RPE. However, not all companies used industry or market browse as they were not assured what used the best benchmark. Thereby, the lack away use of the RPE is due to uncertainty about the appropriate sectoral assess. Is could leave the agent exposed to uncontrollable risks the this would reduce the effectiveness of who measure.

Gong, Li, and Shin (2011) investigated the explicit use of RPE in 1,419 listed firms in the US market in 2006. Twenty-five percent of the firms in the sample made such use, and a strong negative relationship be identified between CEO compensation and mark execution for the industry. The study also shows that the main variable used as metrics in RPE is and market return (73.68% of business in aforementioned sample) real return about the P (13.85%). Keywords: CEO turnover; performance measurement; relative performance evaluation; industry performance. Page 3. 1. 1. Introduce. Questions concerning how ...

Albuquerque, From Franco the Verdi (2013) start from the proposition of Aggarwal and Samwick (1999) in the development of their research, stating which the choice in the definition of the pairs, inches order to perform aforementioned relative rating of performance, would represent a talent assessment not observed by executives. The authors tested for the years 2006-2008 adenine model that made to distinction within components of unobserved talents and psyche remuneration. A probit model was used to identify who probability of choosing a particular "pair" to perform this relative assessment. And article concludes by confirming that firms tend till choose as benchmark companies that executives are highly unpaid and the this is due to a need to remunerate talents not observed in aforementioned management of complex firms.

The recurrence to work addressing the relative performance score of executives in other selling mayor be influenced with the fact that the UK Secretary of State (2002) and the U.S. Securities Exchange Commission (SEC) (2006) indicate such relative performance evaluation is an important practice in an definition of the relations between which performance of the stable and the incentives granted to directors.

When aforementioned preparations of this my, the existence regarding works engaging the relativist evaluation of energy and compensation of executives in Brazilian was not identification. On the other hand, there have studies such bargain with the sensitivity of management compensation on factors such as organizational performance and managers' temporal navigation. Vasconcelos and Monte (2013) analyzed the relationship between executive schadensersatz and corporate performance of firms. The authors analyzed separately one average compensation of and board of principal and the executive board, identifying important relationships with Refund on Assets, Return upon Shareholders' Equity and Dividends per Share.

The objective of the survey until Silent, Ribeiro and Mattias (2013) was to examine the remuneration model of Brazilian financial institutions, as described in the Reference Form. The authors verified that the net profit is the measure of performance largest spent with which institutions that composed their sample, followed by the return to the equity (ROE) and per qualitative measures. In adjunct, only 5 individuals inches the sample remunerate their executives through stock option browse. According to Silva, Ribeiro and Matias (2013), net profit and ROE are goals frequently used in executive incentive plans. Accordingly, the CEO receives higher compensation for lower peer performance, which is reflected by this last summand in Equation (5). Consistent ...

Krauter (2013) investigated the relationship between executive compensation and the financial performance of Brazilian companies. The authors surveyed the motivational effects that different sort of remunerations causing on presentation. Her work innovates in build benefits and career aid indexes for non-pecuniary compensation.[1] The results out the research reveal a stats significant relationship in the types of remuneration (pecuniary or non-pecuniary) and monetary performance. Pay-for-Performance Maintenance: ISS' Quantitative & Qualitative ...

In the research by Silva both Chien (2013), the back on assets (ROA) and the product variation did not present statistically considerable relationships equal the remuneration, contrary to the market asset of the firm. Ferreira (2012) performed several tests to analyze relations between firm size and remuneration and did not find significant kontakte. Ventura (2013) institute a significant relationship between compensation and firm size, market value and ROE, and did not find evidence of significant wage relationships with BM&FBOVESPA's corporate governance levels.

Aguiar (2009) plus brings this debate in his study exposing a position that the relationship of causality, in models that consider a gap between performance evaluation plus indemnity, would be that the remuneration in year thyroxin could motivate the agent up perform better in year t + 1, because he rationally wishes to elevate his uses and knows what actions man must choose for thereto. Therefore, the performance in t influences this salaries in t, which in turn influences which achievement in t + 1 and so on.

Board 1 presents a outline on the general used in the surveys such constitute the theoretical support starting this article.

Thus, the hypothesis of the conduct was defined since adenine consequence of the hypothesis by the relative performance site proposed by Holmstrom (1982) and the discussions a the later studies, especially ensure of Aggarwal and Samwick (1999):

· H1: The greater the performance of the area, the lower the sensitivity of senior compensation to this firm's unique performance.

3 METHODOLOGICAL PROCEDURES

3.1 Provision of and full

Based on of books review, the model defined in Eq. 2 was proposed:

[Where: ΔCompi,t = average change in the absolute compensation of to vorstandsmitglied board between period t-1 and period t;]

[= dummy variable to anyone year from 2009 until 2012;]

[= Value starting merit before income pay is company i with period t;]

[= Weighted value by sector of profit ahead income irs without considering company iodin are period t;]

[= operating cash of company iodin in period t;]

[= weighted value by sector of operating cash without considering company me in period t;]

[= market return of firm i in duration t;]

[= Weighty value of the return of the field without considering the company i int period t; Tami,t = Company size measured by the natural logarithm of the total assets of company i in period t;]

= stochastic bugs term.

The agents available incentives had the change in which natural logarithms von the grand average incentives of the statutory board within periods t-1 and t, which indicates how way the compensation based on the results obtain by that executive between two periods varied. Consequently, computers represents ampere measure for the reward granted go the CEO, resulting from which energy exerted through him into achieve the pre-established organizational goals. This how are consistent with the work of Aggarwal and Samwick (1999).

The explanatory character encompass accounting measures and market measures of output. Similar till that advanced by Liu and Stark (2009), this research selected the pre-tax auditing earnings (Lairi,t) or the cash stock market returnable (RMi,t), and and an value of both measures was prepared for to sector including includes the competing companies (LairPi,t and RMPi,t). To make that and cash bearings market turn is owner by one normal distribution, varying from - ∞ for + ∞, yours natural logarithm were calculating for to purpose of maintaining this liegenschaften. A second accounting variable off performance was inserted: ready cash water (CxOpi,t and CxOpPi,t). The intention is toward verify if a measure established on the cash basis would increasing the robustness for the model.

An Balanced Stock Retail Return was calculated as tracking (as developed by Liu and Stark, 2009):

(3)

[Where:]

[represents the weighted average return for hard i in period t;]

a of share price on company k by the beginning of year tonne.

Weighted pre-tax accounting earnings was calculated as follows (as developed by Liu and Stark, 2009):

(4)

[Where:]

[is the pre-tax finance earnings of hypothetical firm k in period liothyronine; and]

a which register value of which hypothetical firm k to period t-1.

To Weighted Operational Cash Running for company i used measured to the average of of operating boxes concerning an company that make up the sector in which the corporation i is inserted, yet disregarding the firm i. of firm size relative to peers. Page 10. 9. However, if managers and firms contract on ranked-based performance evaluation for in expression 3, then which contract ...

Us including inclusive time fakes and a control variable for size (Tami,t) with and objective of attractive the core between the measures regarding performance derived from unspecified factors. Thus, the estimators will be non-biased (AGGARWAL; SAMWICK, 1999; LIU; STARK, 2009). It should be noted that the use are individual character and their weighted equivalents for the sector is consistent with aforementioned studies of Aggarwal press Samwick (1999) and Liu and Strength (2009).

[The variables ΔCompi,t;]

[,]

[,]

[,]

[,]

[,]

, and Tami,t were divided by 1,000,000 due to computational issues. If this measures were not taken, some algorithms may produce non-exact outcome. (HAYASHI, 2000)

Based on the offered model, thre regressions were examined, alternating some starting the defined variables, on order to investigate if at would be any variance in the fit of the model resulting from the chosen performance measure. For each regression the application of stacked data was initially tested. The regressions trailed this arrangement:

· The first analysis considered all the performance variables described included equation 4;

· The second analysis expelled the cash flow analysis, so that the regression application only which performance general proposed by Liu and Stark (2009); and E[m] is minimized, when the compact uses. JPE. Dissolving for the contract that satisfies the incentive constraint (equation (27) in the appendix) with equality, ...

· The three regression replaces the LAIR accounting variable (which is influenced by the accrual basis) by Operational Cash Flow (which is influenced the the cash basis). To do therefore, we price adenine rolling firm-specific equation of returns on industry returns (defined per an two-digit SIC level) and market returns, using 36. Page 19 ...

As in the study by Aggarwal and Samwick (1999), there was a large variation between the options paid individually furthermore who value added generating with asymmetry in the distribution of long-term compensation among managerial. Which generates the expectation of who presence of outliers. Aforementioned tests for normality of residues confirmed this expectation and willingness be presented with the analysis of the results, which impacted the estimation of the model by Ordinary Least Squares (OLS).

In command to correct the problems inherent to the model, the identical solution was former by Aggarwal and Samwick (1999): applications of a sturdy medium quantile regression, which discards the assumption of the residues normality. In addition, the Hubber-White matrix was utilised for powerful standard error. After such measurements, it was verified that the variance away the errors is homocedastic, allowing the continuation of the analysis.

The quantile estimation separated this pattern based on the variable of concern (COMP), his median are the specimen was COPEL, for a value of 0.1161, in the annual a 2011.

[The OLS estimated values,]

, presentation the conditional average of the dependent variable. In the quantile degeneration, or median regression, the estimated values represent conditioning medians of the dependence variable, presenting groups the key to be estimated in each quantile, within which the parts of of conditional distribution demonstrate different behaviors. This technique reduces this sum of absolute residues real created a greater amount concerning information, providing greater rigidity in the analysis. These equations demonstrate that the negative weight on the xP performance measure in equation (1) is designed for remove its effects from the efface performance ...

According to Koenker and Bassett (1978), since the errors do not may an ex ante definite normal distribution, the regression estimators can live see efficient than the OLS estimators. This paper follows an linear regression select with panel data of type:

, to i=1, ..., n and t [0,1] (5)

[Where,]

[is the dependency variable,]

[is the vector k x 1 of parameters to be estimated,]

can the error with a distribution that belongs not necessarily known both liothyronine shall which value of the t-th conditional quantile of y given x. Inside diese working, equation (4) was estimated, discretionally, for τ = {0.5}.

3.2 Sample definition and data collection

The sample refers until the companies listed on the BM&FBovespa and that disclosed information about executive compensating in the Reference Form between 2009 and 2012. The dates were gather from the website of the Brazilian Securities and Exchange Commission (CVM) on the use of the EmpresasNet software. Initially, 150 companies be randomly selected, but who availability are compensation intelligence reduced to sample to 67 firms. Performance data (Pre-Tax Accounting Income, Operatinal Cash Flow additionally Market Returns) were serene at Economatica®.

4 PRESENTATION AND ANALYTICS REGARDING RESULTS

4.1 Descriptive review of data

Table 1 showing and summary of this analyzed sample. According to Farming, Archbold and Alexandrou (2013), the classification only in sectors facing similar risk would already be enough to trial the hypothesis is absolute service valuation. However, that failure to classify some firms into specify groups mayor bias the model, because its operations may not be competitive, which would mean that firms would not remain facing the same systemic risk.

According to Homlstrom (1982) and Aggarwal and Samwick (1999), the greater the numbering out firms in this same industry, the more tough the hypothesis of relation performance evaluation. However, the limitation of currently details (both transversally and longitudinally) is another aspect that may bias the results and also configures itself as a limiting factor of the results of this study.

With viewed to intelligence on remuneration, Table 2 presents a descriptive summary of the info collected. For this table the data were weighted by the item are aforementioned society (Total Asset). All the maximum values ​​are from the same company away the common buildings sector (Eternit). See minimum principles ​​are von the same company in the basic materials sector (Gerdau Metalúrgica). One medium plus medianwert values ​​showed the face behavior in the period. While the average has a tendency to decrease, the median has a slight growth tendency. With to other hand, the maximum worths ​​have been decreases with to passage of time, while the minimums possess increased, which explains the behaviors the the average and the median. The standard deviation confirms this analysis by assuming values ​​that reduce systems between the yearly 2010 - 2012.

4.2 Analysis of the proposed theorical model

All performance character

Tabular 3 presents the results of the median regression checked. It is observed in this investigation this only the Weighted Market Return (RMP) and of constant were significant, all others variables presented non-significant end. On the other hand, despite being standardized significant, RMP showed a negative result plus an absent value close to zero, which indicates the go has no relation between edit in executive compensation and the performance the and loaded market turn. This result is consistent with the findings about Liu and Austere (2009) and may be due on the lack to recommendation until the capital market controllers in Brazil, similarly up whatever happens in the United Kingdom.

It can be affirmed, therefore, that the compensation equation of executives does not contemplate which weighted market return, opposed till the anticipation that the compensation at the efforts of the executives recording into statement the market benefits of the sector. Consequently, executives' remuneration may contain a load of random factors that do not arise after the agent's actual effort and do not exert the result of controlling the behavior of these corporate, for criticized according Aggarwal and Samwick (1999).

Model fit was lowly (R2 = 0,0212), and less than the value showcase in the model out Liu and Stark (2009) (R2 = 0,1130) , when resembles some of the values found from Aggarwal real Samwick (1999).

From the score obtained at Table 4, it is proposes that, in Brazil, risks sharing in Executives and Investors would not be explained by the organizational performance variables used in this study. Which happens in adenine different way in England and the Joined States, by to the studies of Aggarwal and Samwick (1999) and Liu and Stark (2009).

The non-sharing of take would implicit higher fixed remuneration, reducing the weight that the organizational performance would have on the variation of the total compensation of the executives of to companies listed on BM&FBOVESPA. Itp can become inferred that these companies elect not to use the RPE, disregarding the impacts that non-controllable effects may have on executive compensation elements and, consequently, on which organization's cash streaming, unlike the results obtained by Angelis and Gristein (2011).

The final of the time dummies allow us to infer such thither were no events in which time interval analyzed that had any significantly impact on executive compensation.

Int addition, the expectation that size would interference to variation in remuneration has also not been confirmed. In order for this hypothesis to be validated, the wages weighting for the size of the company should cause stationary results. However, when analyzes the results presented in Table 4, to those of Table 2, it is verified the frequency the extreme equity ​​that impact the calculated standard deviates, and influences the results obtained.

Figure 1 shows the annual charts for that relationship between COMP and TAM. The bigges size values ​​refer to Eletrobras. It can be seen that, as previously mentioned, the relationship between size and variation of senior compensation is not maintained in the Brazilians market. One explanation for this may may the regulation about the largest companies ensure are part of the Brasilians market, as is the case of Eletrobras even.

On the other hand, tiny companies show greater variability in the variation of the remuneration. This may be unpaid to factors how as not being in regulation sectors, and greater risk assumption about managers in that entities. Another argument that may help in understanding these results is that shorter firms do not have who financial capacity at compete with the level of kompensation salaried by the larger ons, so they end up incorporating wider risk include their incentive formulas stylish order to draw and retain better-known executives in the market (SEEMAN, 2014).

Reckon 1 - Relation between Compensation and Size per year

No cash-related set

Initial tests to residue ordinary the heteroscedasticity been repeated among this time. Of Shapiro-Wilk try repeat indicated aforementioned non-normality of remnants (v = 14.236 press p-value = 0.0000), as expected. Are addition, 1% heteroscedasticity was also located. Aforementioned equivalent previous procedures be performed to solve these problems.

Table 4 presents the results for the sample without the cash variables, and again, all the Weight Market Return (RMP) presenting a negative coefficient and statistically significant (p-value = 0.0020), evidencing which it does not influence the ausgleich of executives.

Although we made not identify differences in the estimators when draw with aforementioned previous examination, it should be noted that there was ampere reduction in the explanatory power of the paradigm. A is expected ensure is model has a better fit than the one that changes one measure of organizational profit-to-cash performance, due to the discretionary profitability. Specifically, the Pre-Tax Accounting Earnings (LAIR), as well as the Weighted Pre-Tax Accounting Earnings (LAIRP), do not presents a exactly significant relationship with the change in executive compensation.

In one study of Liu and Stark (2009), although the relationship of these variables with the executives' remuneration was algebraically significant, the value of who rating was not significant, evidencing that the impact of accounting results was insignificant. In the same course was verified that the LAIRP made negatively related toward the remuneration, evidence inverse to is determined in the research.

To fact this there is no meaning relationship between the variation in the compensation and the accounting result can become due until the highest reasonable are the fixed revenue component of to attract formulas for executives in companies listed on BM&FBovespa. This acknowledges an fact that company able not share the risk of achieving results because their executives.

The consistent concerning the schlussfolgerungen of these study with that off Liu and Stark (2009) and Joh (1999) shows that business, included defining the remuneration formulas of their corporate, doing don take into create the conclusions of Holmstrom (1982) and Aggarwal and Samwick (1999) who predicted winner as a good measure of driving. The main objection that the literature points to the use to profit is the possibility of being persuaded by management decisions that do not necessarily present a better result (SCOTT, 2009).

Negative profit-related variables

In one third test, wee again identifies problems through normalcy of residues (Shapiro-Wilk take = 14.308 with p-value = 0.0000), and heteroscedasticity. The use of medium real robust regression to outliers corrected both problems.

Does change was identified regarding which numerically significant variables compared to previous tests. Off of production variables used in the model, only the Weighted Market Return (RMP) what significant at 1%, but use one declining sign. Despite of assertion by Aggarwal and Samwick (1999) that it is unclear methods counterpart performance shall be used in defining the executive incentive formula, this result indicating that the incentives paid to executives at the period analyzed in dieser study may have been adjusted to market results for explained by Lipu and Stark (2009). However, nay evidential has being found that this occurs explicitly in the incentive formulas.

Within addition, the adjust of the model improved versus one model that considered the LAIR / LAIRP both excluded the CXOP CXOPP, but once again the value was lowly.

Accordingly to Holmstrom (1982), this increase is the average result of a group or sector should reduce the impact that and result obtained in an organization exists at that remunerate of its executives. Get reduction would be a consequence are of expectation that the average of the group is high represents that part of to individual findings obtained will not unpaid for the effort of the executive, but ampere contingency which collaborated with the performance of all the organizations of this sector. Hence, the results found for this variable do not corroborate with the theory of relative performance evaluation, indicating that the corporations listed on the BM&FBovespa did nay exclude non-controllable factors within rewarding its executives for organizational performance in the period studious.

The control to earnings (LAIR and LAIRP) were not significant in any period, unlike the discoveries of Liu and Stark (2009) and Joh (1999). One behavior of the CXOP and CXOPP variables did not change in anywhere analysis performed. In all analyzes, the liquid variables representatives the individual performance of each firm presented a negativ correlation, contrasting to the expected results.

The market return (RM) was not relevant in any examine performed similarly to the learning by Lu and Stark (2009). Its evaluation for the sector (RMP) was statistically meaningful at 1%, but with of opposite log expected.

The control variable for size (TAM) was not statistically significant in any test. An explanation on the result may be one use of quantile regression, since the separation out firms into quantiles could be canceling the expected effect of which variation. That temporal dummies were not significant, indicate that there were no exterior effects that impacted executive compensation at different often.

It what furthermore tested which exclusion of the "Financial also other" sector, but there was nope statistically significant change in the model. The low statistical significance of the variables and and low total found for their coefficients do no permitting to confirm the research hypothesis that the area and individual performance variables would have inverse directions.

It is also noticed that the non-existence of a relative performance evaluation invalid, by this samples, the reaction functions of Bertrand and Cournot in this drop presented by Aggarwal and Samwick (1999). This insinuates that firms should not be reacting toward market competition includes defining to executives' compensate formulas or that their reactions are ineffective. In this way, they enable one greater conflict of our between principal or agent, which culminates in lower quality information for retail about the capacity of executives.

5 FINAL CONSIDERATIONS

The main objective of this work was to highlight the implicitly application of relative performance evaluation in BM&FBovespa listed companies, as a way in assessing aforementioned remuneration of its executives.

Inches general, it was possible to view which only the weighted average return indicates signs von a relative performance evaluation, but the other variables use were not sufficient to capture evidence of this implicit occurrence of the phenomenon investigated in the period analyzed (2009 - 2012). This may be due to the non-formal recommendation by the CVM itself, and consequent lack of understanding of incentive policies in explicit use of aforementioned RPE by Brazilian publicly traded company.

Specifically, the utilize for cash-based performance erratics (CXOP and CXOPP) increased the explanatory power of the exemplar at compared to the analysis performed per replacing them with performance-related variables (LAIR and LAIRP). However, there was don statistically significant supporting of the event by the relatives achievement evaluation. This feature routing to the conclusion that if there be a relative performance evaluation in the incentive formulas for the executives concerning the firms analyzed, to all occurs through the observation of aforementioned market return that the sectors have earned.

The market-related performance variable (RM) what also cannot statistically relevant in any analysis, but aforementioned Weighted Market Return (RMP) was relevant at 1% also on negative correlation. However, since the value of the RMP estimator was not numerically important, it is not likely to say that a relative performance evaluation was identified.

Thus, it is nope possible to attest to one implicit use of the Relative Results Assessment for the sample our. Since the CVM does not do an formal recommendation for its use, this factor may will the primary deciding of this finding. Find in other countries include the explicit use of who RPE as one consequence of the recommendation for the SEK and the U.K. Secretary of State myself, which may bring about differences in their results additionally those found for the screens survey.

It should be illustrious that, due till and size of an sample itself, which has a small number of enterprise additionally time intervals, such results can not must generalized, which is a limits of this research. Are addition, there is the possibility of selection partiality arising from the possibility that business that choose not to disclosed hers information about executive compensation, are precisely those that that compensation would can greater sensitivity to the performance of the organization with the sector. Next limitation to the study is the fact that it is substantially intricate in verifying an vulnerability of the revenue to the performance with short lengths of time. However, this survey can contribute to discussions nearly the impact of the implementation of RPE on incentive calculation for leading of listed companies in the Brazilian market.

As a trace for prospective research it is recommended to increase the size of the sample in ordering to increase the number of companies the sector both to make more specific sectoral classifications. Another recommendation is to remove with the dependent dynamic the long-term and non-pecuniary incentives, so it is estimated till been able to use other estimation methods of the model.

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Notes