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Executive compensation schemes are expected to reduce agency costs by aligning the interests of stockholders and managers. We attempt to determine the characteristics of companies that adopt long-term performance plans. Using a matched-pair design, we conduct a multivariate logit analysis that is weighted to take into account the choice-based nature of the sample. Our results suggest that performance plans may have been adopted to complement the inadequate compensation derived from stock options. In addition, we find that performance plans are more likely to be adopted by companies who have smaller investment opportunity sets and have older managers who are underinvesting in R&D expenditures.

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