Establishing the Forecasting Model of Board of Director's Compensation Based on Precision, Sensitivity and Time Horizon Dimensions of Profit in Companies Listed in Tehran Stock Exchange

If there is no proper fit between the compensation and the actual performance of managers, due to the separation of ownership from management and related agency problems, not only does this decrease corporate value but it also will be a means to transfer wealth. According to the results of research, important indicators to measure the performance in compensation contracts are profits accuracy, sensitivity and time horizons. This paper attempts to explain the board of directors compensation model in Iran based on the above dimensions of profit. To this aim, the data related to 121companies listed in Tehran Stock Exchange for the period 2009 to 2016 were extracted and regression and factor analysis were used to test the hypothesis. The results showed that the compensation is less related to the accuracy of profit, so the opportunistic incentives to harness profits to achieve manager’s interests have not been considered sufficiently. But compensation is more consistent with the sensitivity and time horizons of profit, and finally the reward prediction model is presented.