Optimal choice of relative performance indicator and product market competition

• Jumpei Hamamura ^[1] ; Sho Hayakawa ^[2]
  1. [1] Kwansei Gakuin University

     Kwansei Gakuin University

     Japón

     
  2. [2] University of Marketing and Distribution Sciences,Japan
• Localización: Economics and Business Letters, ISSN-e 2254-4380, Vol. 13, Nº. 3, 2024, págs. 112-121
• Idioma: inglés
• Enlaces
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• Resumen

  • In this note, we explore what performance indicator is optimal in a product market competition, when firm’s owner compensates managers based on the relative performance evaluation (RPE). Comparing the firm’s own profit with competitor’s profit, prior studies examine RPEwith product market competition. However, in practices, other performance indicator is sometimes adopted as an indicator, in addition to profits. Based on this motivation, we demonstrate that owners adopt sales as a relative performance indicator to evaluate CEOs’ performance in specific economic conditions. This result implies following contributions to RPE studies. First, our result will conduct the future research avenue about the choice of relative performance indicators. Second, our study has an important implication to empirical RPE research