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Article
An Empirical Analysis of Continuing Improvements Following the Implementation of a Performance-Based Compensation Plan
Articles and Chapters
  • Rajiv D. Banker, University of Texas at Dallas
  • Seok-Young Lee, Sungshin Women's University
  • Gordon S. Potter, Cornell University School of Hotel Administration
  • Dhinu Srinivasan, University of Pittsburgh
Publication Date
1-1-2000
Abstract

Performance improvements subsequent to the implementation of a pay-for-performance plan can result because more productive employees self-select into the firm (selection effect) and/or because employees allocate effort to become more effective (effort effect). We analyze individual performance data for 3,776 sales employees of a retail firm to evaluate these alternative sources of continuing performance improvement. The incentive plan helps the firm attract and retain more productive sales employees, and motivates these employees to further improve their productivity. In contrast, the less productive sales employees’ performance declines before they leave the firm.

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Required Publisher Statement
© Elsevier . Final version published as: Banker, R. D., Lee, S., Potter, G., & Srinivasan, D. (2000). An empirical analysis of continuing improvements following the implementation of a performance-based compensation plan. Journal of Accounting and Economics, 30(3), 315-350. doi:10.1016/S0165-4101(01)00016-7
Reprinted with permission. All rights reserved.

Citation Information

Banker, R. D., Lee, S., Potter, G., & Srinivasan, D. (2000). An empirical analysis of continuing improvements following the implementation of a performance-based compensation plan [Electronic version]. Retrieved [insert date], from Cornell University, School of Hotel Administration site: http://scholarship.sha.cornell.edu/articles/900