Agency theory argues that relative performance evaluation (RPE) contracts can better assess managerial effort by removing common uncertainty from the agent's performance. The primary objective of this paper is to empirically test whether relative performance is considered in Korean listed firms. Using cash compensation (salary plus annual bonus) data for 82 firms over the period 1983–1995, this study examines the sign of the slope coefficient on peer industry performance for both accounting and stock price performance measures through time-series and cross-sectional analyses. The results can be summarized as follows. For the full sample, the relative performance evaluation hypothesis was not supported for any performance measure. Therefore, we repeated the analysis on subsamples of firms where the compensation model appeared to be well specified (the first and second subsamples consist of firms with positive adjusted R² and positive firm performance coefficients, respectively). In the time-series regressions for the second subsample, evidence supporting the relative performance evaluation hypothesis was found in models using return on equity based on ordinary income and stock returns as performance measures. As a supplementary investigation, this paper also examined how the extent of relative performance evaluation varies across industries. The industry-level analysis revealed that the relative performance evaluation hypothesis was supported for the second subsample in the chemicals, petroleum, coal, and rubber industry, as well as for all subsamples in the general construction industry.