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U.S. airline responses to mandated disclosure of non-financial performance

Author

Listed:
  • Gu, Xiaozhe
  • Nagarajan, Nandu J.
  • Sayrak, Akin
  • Srinivasan, Dhinu

Abstract

This paper provides evidence on US airlines’ responses to the U.S. Department of Transportation’s (DOT) mandated disclosure of non-financial performance. We find that while all three DOT measures are associated with customer complaints, airlines are more likely to improve on-time performance rather than mishandled bags and ticket over-sales following poor prior period performance. We also find that on-time performance is the only DOT measure that is associated with future accounting performance and is significantly associated with CEO compensation after controlling for financial performance and load factor. We also provide preliminary results to show that airlines incorporate the more informative component of the on-time measure in CEO compensation. Overall, we provide new understanding of how organizations react to the disclosure of non-financial performance and use incentives to improve these measures.

Suggested Citation

  • Gu, Xiaozhe & Nagarajan, Nandu J. & Sayrak, Akin & Srinivasan, Dhinu, 2024. "U.S. airline responses to mandated disclosure of non-financial performance," Journal of Contemporary Accounting and Economics, Elsevier, vol. 20(1).
    • Handle: RePEc:eee:jocaae:v:20:y:2024:i:1:s1815566923000449
    DOI: 10.1016/j.jcae.2023.100394
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    More about this item

    Keywords

    CEO compensation; Incentive contracts; Pay-for-performance; Non-financial performance measures; Airline industry;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • L93 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Air Transportation
    • M3 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising
    • M4 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting

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