Revisiting Pay-performance Sensitivity around IFRS Adoption in Europe: The Dominant Role of Germany

Jesper Banghøj, Jan Marton*, Thomas Plenborg, Emmeli Runesson

*Corresponding author for this work

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In this study, we investigate the effect of IFRS adoption on pay-performance sensitivity (PPS) in the European Economic Area (EEA) and show that the documented positive effect is driven by one country: Germany. In pooled country tests, we explore the effect of individual institutional attributes and find that differences between IFRS and local GAAP, as well as proxies for different types of enforcement, moderate the IFRS effect. However, these findings are contingent on including Germany in the sample. This raises the possibility that the studied institutional attributes proxy for Germany, and that it is the unique combination of institutional attributes in Germany that explains the increase in PPS at the time of IFRS adoption. Our findings suggest that researchers should be careful when generalising results from multi-country studies or attributing the IFRS effects to individual institutional variables.
Original languageEnglish
JournalAccounting and Business Research
Issue number7
Pages (from-to)790-820
Number of pages31
Publication statusPublished - 2023

Bibliographical note

Published online: 10 Jun 2022.


  • Executive compensation
  • IFRS adoption
  • Pay-performance sensitivity
  • Institutional attributes

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