The Relationship Between Firm Risk and Executive Compensation PDF Download
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Author: Samuel Ray Gray
Publisher:
ISBN:
Category :
Languages : en
Pages : 286
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Book Description
Author: Samuel Ray Gray
Publisher:
ISBN:
Category :
Languages : en
Pages : 286
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Book Description
Author: William Kline
Publisher:
ISBN:
Category :
Languages : en
Pages : 128
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Book Description
This dissertation consists of three papers examining managerial decision theory, executive compensation, and firm performance. The first paper examines the relationship between executive pay and common equity holdings and risk-adjusted performance; the second paper examines the relationship between executive pay and common equity holdings and strategic decisions, specifically entry mode decisions; and, the third paper develops theory related to the relationship between organizational constitution, valuation constitution, and executive compensation.
Author: Robert DeYoung
Publisher: DIANE Publishing
ISBN: 1437931006
Category : Business & Economics
Languages : en
Pages : 57
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Book Description
This study examines whether and how the terms of CEO compensation contracts at large commercial banks between 1994 and 2006 influenced, or were influenced by, the risky business policy decisions made by these firms. The authors find strong evidence that bank CEOs responded to contractual risk-taking incentives by taking more risk; bank boards altered CEO compensation to encourage executives to exploit new growth opportunities; and bank boards set CEO incentives in a manner designed to moderate excessive risk-taking. These relationships are strongest during the second half of the author¿s sample, after deregulation and technological change had expanded banks' capacities for risk-taking. Charts and tables.
Author: John E. Core
Publisher:
ISBN:
Category :
Languages : en
Pages : 34
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Book Description
In contrast to a body of research starting with Demsetz and Lehn (1985) that predict and find a strong positive association between firm percent return variance and incentives, Aggarwal and Samwick (1999) predict and find a strong negative association between firm dollar return variance and incentives. A key assumption of Aggarwal and Samwick's analysis is that firm risk is the sole determinant of the pay-performance sensitivity, and that expected dollar return variance (the product of expected percent return variance and firm market value) is the correct proxy for risk. We demonstrate that dollar return variance is a noisy measure of firm market value and argue that Aamp;S re-documents a size effect that is already well-known from prior literature. Because dollar return variance is shown to be a noisy proxy for firm size, the Aamp;S empirical specification does not include an appropriate proxy for firm risk. The data consistently show that it is important to examine market value and percent return variance as separate determinants of the effects of size and risk on CEO incentives, as is done in the managerial ownership literature. In a model of CEO incentives that includes market value and risk as separate explanatory variables, we find that, contrary to the results in Aamp;S, percent return variance is positively associated with incentives. The Aamp;S empirical work cannot be interpreted as evidence of a negative relation between risk and incentives.
Author: Hussam A. Al-Shammari
Publisher: ProQuest
ISBN: 9780542863424
Category : Economics
Languages : en
Pages :
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Book Description
The ever-increasing levels of executive compensation in North America have attracted the growing attention of researchers, policy makers, and the general public. This dissertation reviews the literature on executive compensation and proposes two theoretical models that seek to explain the relationship between CEO option pay, firm risk and performance. Prior empirical research has failed to produce consistent relationships between executive compensation and firm performance. This dissertation opens the "black box" between executive compensation and firm performance and empirically tests the intervening effect of risk-taking behavior on this relationship. It also examines the moderating effects of firm governance systems, strategy and the environment on the relationship between CEO option pay and risk taking. The population for this study is U.S. publicly-traded manufacturing companies. A sample of 204 companies were drawn from the Fortune 1000 for testing the hypothesized relationships. Data were retrieved from various archival sources including Compustat, ExecuComp, Mergent Online, Census for Manufacturing, Thompson Financial, and Value line databases. The dissertation uses both mediated hierarchical regression analyses and moderated hierarchical regression analyses to test the hypothesized relationships suggested in the first and second models, respectively. Results reveal a strong, positive relationship between CEO option pay and a firm's strategic risk, stock returns risk, and income stream risk. Results also showed that firm strategic risk, measured by R & D expenditure, mediates the CEO option pay-firm performance relationship, either fully or partially, depending on which type of performance is being examined. Further, a moderating effect is unveiled for CEO duality, insider ownership, and firm strategy. However, empirical analyses fail to provide adequate evidence to support the expected moderating effect of board independence, institutional and blockholder ownership, and environment.
Author: Jennifer Carpenter
Publisher: Springer Science & Business Media
ISBN: 1475751923
Category : Business & Economics
Languages : en
Pages : 159
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Book Description
Executive compensation has gained widespread public attention in recent years, with the pay of top U.S. executives reaching unprecedented levels compared either with past levels, with the remuneration of top executives in other countries, or with the wages and salaries of typical employees. The extraordinary levels of executive compensation have been achieved at a time when U.S. public companies have realized substantial gains in stock market value. Many have cited this as evidence that U.S. executive compensation works well, rewarding managers who make difficult decisions that lead to higher shareholder values, while others have argued that the overly generous salaries and benefits bear little relation to company performance. Recent conceptual and empirical research permits for the first time a truly rigorous debate on these and related issues, which is the subject of this volume.
Author: Rajesh K. Aggarwal
Publisher:
ISBN:
Category :
Languages : en
Pages : 24
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Book Description
Core and Guay (2001) argue that there is an increasing relation between an executive's pay-performance sensitivity (incentives) and firm risk, in contrast to the findings in Aggarwal and Samwick (1999) and the predictions of principal-agent models such as Holmstrom and Milgrom (1987). They claim that including a control variable for firm size in our regression specification reverses the sign of the coefficient on firm risk. We show that their conclusions are based on errors in their empirical work, not the validity of their claim. We re-examine both our original findings and Core and Guay's findings and show that our original findings are quite robust to changes in specification - the relation between pay-performance sensitivity and firm risk is decreasing as predicted by principal-agent theory.
Author: Steven Balsam
Publisher: Academic Press
ISBN: 9780120771264
Category : Business & Economics
Languages : en
Pages : 410
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Book Description
General readers have no idea why people should care about what executives are paid and why they are paid the way they are. That's the reason that The Wall Street Journal, Fortune, Forbes, and other popular and practitioner publications have regular coverage on them. This book not only proposes a reason - executives need incentives in order to maximize firm value (economists call this agency theory) - it also describes the nature and design of executive compensation practices. Those incentives can take the form of benefits (salary, stock options), or prerquisites (reflecting the status of the executive within the organizational culture.
Author: Paul L. Joskow
Publisher:
ISBN:
Category : Chief executive officers
Languages : en
Pages : 56
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Book Description
This study explores the dynamic structure of the pay-for- performance relationship in CEO compensation and quantifies the effect of introducing a more complex model of firm financial performance on the estimated performance sensitivity of executive pay. The results suggest that current compensation responds to past performance outcomes, but that the effect decays considerably within two years. This contrasts sharply with models of infinitely persistent performance effects implicitly assumed in much of the empirical compensation literature. We find that both accounting and market performance measures influence compensation and that the salary and bonus component of pay as well as total compensation have become more sensitive to firm financial performance over the past two decades. There is no evidence that boards fail to penalize CEOs for poor financial performance or reward them disproportionately well for good performance. Finally, the data suggest that boards may discount extreme performance outcomes -both high and low - relative to performance that lies within some `normal' band in setting compensation.
Author: Patrick Gebhard
Publisher: GRIN Verlag
ISBN: 3656395616
Category : Business & Economics
Languages : en
Pages : 59
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Book Description
Bachelor Thesis from the year 2013 in the subject Business economics - Business Management, Corporate Governance, Technical University of Munich, language: English, abstract: This thesis studies the effects of share-based pay on managerial risk-taking. At first, the relationship between managers and shareholders as predicted by agency theory is described to motivate the use of share-based pay. Then, the influence of manager-specific attributes and compensation design on the risk premium and the risk incentives is discussed Theoretical and empirical research findings are presented and discussed to gain insights into the determinants and effects of stock-based compensation. Last but not least, a descriptive analysis of the payperformance sensitivities of the stock and option portfolios of board members in the German DAX and MDAX in the period of 2006 to 2010 is conducted. Zusammenfassung Die vorliegende Arbeit untersucht die Auswirkungen von aktienkursorientierter Vergütung auf das Risikoverhalten von Managern. Basierend auf den Vorhersagen des Principal- Agenten-Modells wird zunächst die Beziehung zwischen Aktionären und dem Vorstand beschrieben, um die Verwendung aktienkursorientierter Vergütung zu begründen. Darauffolgend wird der Einfluss von managerspezifischen Eigenschaften und der Vergütungsstruktur auf die Risikoprämie und die Risikoanreize dargelegt. Zur Identifizierung der Determinanten und Konsequenzen von aktienkursorientierte Vergütung werden theoretische und empirische Forschungsergebnisse präsentiert und diskutiert. Abschließend wird eine deskriptive Analyse der Unternehmensleistungssensitivitäten von Aktien- und Aktienoptionsportfolios von Vorständen aus DAX und MDAX in der Periode von 2006 bis 2010 durchgeführt.
