This investigation utilized a robust logistic regression method
(BYLOGREG) to investigate CEO bonuses prior to the 2007-2009 nancial
crisis. The robust logistic regression analysis determined that the year and
CEO tenure a ected the probability that a CEO received a bonus in the
2004-2006 study period. The analysis refuted that \management entrench-
ment" widely in
uenced CEO bonus compensation because the probability
of receiving a bonus was negatively related to CEO tenure. The probability
of receiving of bonus declined during the 2004-2006 study period because
the percentage of CEOs that received a bonus was lowest in 2006. The
robust logistic regression analysis found that the current year stock return
was positively and statistically signi cantly related to the probability that a
CEO received a bonus. The analysis also showed that managerial ( nancial)
performance in the areas of growth of sales, ROE, and growth in earnings
per share increased the probability that a CEO received a bonus. In this
investigation, the size of the rm and the growth rate of equity were not sta-
tistically signi cant. Overall, robust logistic regression correctly classi ed
77% of the observations on the basis of the model variables, which indicated
that most CEO bonuses could be explained by rm, CEO, and nancial
variables.
The BY robust logistic regression proved to be robust to outliers in the
CEO bonus sample studied. Interestingly, the relationship between stock
return and the probability of a bonus was completely missed by a maximum
likelihood (ML) logistic regression with the full CEO bonus sample, which
contained outliers. After trimming the CEO bonus data set to remove out-
liers, the ML logistic regression coecients changed dramatically. However,
the BY robust logistic regression coecients changed very little. Use of the
residuals from the BY robust logistic equation should facilitate further in-
quiry into CEOs that received a bonus but were predicted to have a low
probability of a bonus