The relative performance evaluation (RPE) hypothesis holds that executive compensation should not depend on uncontrollable exogenous shocks. Nevertheless, prior studies often find limited empirical support for this hypothesis in part because it is difficult to identify peers exposed to the same exogenous shocks. I propose a new way to identify peers and to test the RPE hypothesis in the context of a specific shock. In particular, I select peers based on the sensitivity of their stock returns to exchange rate fluctuations.
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- Doctoral Dissertation Accountancy 2017