A Canonical Correlation Analysis of CEO Compensation and Corporate Performance in the Service Industry

This paper attempts to examine a canonical (simultaneous) relationship between service industry CEOs' compensation and corporate performance with respect to accounting‐based and market‐based performance measures. In addition, this study examines the effect of firm size on compensation. The results of this study suggest that executive compensation depends simultaneously on both market‐based and accounting‐based performance measures. EPS, ROA, ROE and Market Rate of Return are positively associated with both cash compensation and long‐term compensation. Firm size is also positively related to the long‐term compensation.