ACCOUNTING INFORMATION AND INTERNAL PERFORMANCE EVALUATION - EVIDENCE FROM TEXAS BANKS

Multi-bank holding companies file detailed financial statements on their subsidiary banks. The availability of these data allows for an empirical examination of the relation between accounting-based performance and personnel decisions for lower-level managers. For our sample of Texas banks, we find that turnover of subsidiary bank managers is negatively related to subsidiary performance, while promotions are positively related to performance. Holding own-bank performance constant, turnover increases with holding-company performance, which is consistent with the view that turnover decisions are based on performance relative to a firm-specific benchmark.