Operating performance around the adoption of director incentive plans

Recently, numerous firms adopted incentive compensation plans for their out side directors. This study examines empirically the hypothesis that the ado ption of such plans helps to improve the adopting firm's operating performa nce by aligning the interests of directors and shareholders. The empirical tests do not reveal a significant link between the adoption of director inc entive plans and operating performance improvements. Potential explanations for these findings are discussed. (C) 2000 Elsevier Science S.A. All right s reserved. JEL classification: G39.