Top Management Incentives and Corporate Performance

There is little agreement about either the effect of executive compensation on corporate performance or the best way to measure the strength of executive incentives. With little guidance from academic research, managers and directors continue to rely heavily on the percentage of pay "at risk" as a proxy for incentive strength.
Starting with the premise that managers, like investors, are motivated by prospective changes in their wealth, this article presents a measure of incentive strength called "wealth leverage" that reflects the sensitivity of an executive's company-related wealth—total stock and option holdings plus the present value of expected future compensation, including future salary, bonus and stock compensation—to changes in shareholder wealth. After estimating top management's wealth leverage at 702 companies, the authors conclude that: 1) the median company has significant wealth leverage; 2) almost all corporate wealth leverage comes from their accumulated stock and option holdings, not from current compensation; and 3) companies with higher wealth leverage significantly outperform their industry competitors.     

Earnings Management and Firm Performance Following Open-Market Repurchases

Both post‐repurchase abnormal returns and reported improvement in operating performance are driven, at least in part, by pre‐repurchase downward earnings management rather than genuine growth in profitability. The downward earnings management increases with both the percentage of the company that managers repurchase and CEO ownership. Pre‐repurchase abnormal accruals are also negatively associated with future performance, with the association driven mainly by those firms that report the largest income‐decreasing abnormal accruals. The study suggests that one reason firms experience post‐repurchase abnormal returns is that post‐repurchase realized earnings growth exceeds expectations formed on the basis of pre‐repurchase deflated earnings numbers.     

The Cadbury Committee, Corporate Performance, and Top Management Turnover

In 1992, the Cadbury Committee issued the Code of Best Practice which recommends that boards of U.K. corporations include at least three outside directors and that the positions of chairman and CEO be held by different individuals. The underlying presumption was that these recommendations would lead to improved board oversight. We empirically analyze the relationship between CEO turnover and corporate performance. CEO turnover increased following issuance of the Code ; the negative relationship between CEO turnover and performance became stronger following the Code 's issuance; and the increase in sensitivity of turnover to performance was concentrated among firms that adopted the Code .     

Firm Financial Performance Following Mergers

This study, using a sample of 162 firms and industry-adjusted cash flow returns on market value of assets as performance criteria, examines the financial performance of the combined target and acquiring firms over a 5-year post-merger period in relation to the corresponding pre-merger period. We find that post-merger performance is negatively associated with relative target size and positively associated with long-term incentive compensation plans. Firms that are in dissimilar industries also show improved performance, as do firms that merged prior to 1983.     

财富管理渐向高端

随着直接融资市场的快速发展,以及居民理财投资意识的增强,如何加快发展财富管理业务,进而加快推进经营战略调整进程,是摆在我国商业银行面前一项重大而迫切的现实课题。     

Analysts' Forecasts Following Forced CEO Changes

This paper examines analysts' earnings forecasts during the period of uncertainty following a change of chief executive officer (CEO). It distinguishes between forced and non‐forced CEO changes, and examines whether analysts utilize their information advantage to reduce the heightened uncertainty of a forced change of CEO. Examining a sample of Australian companies followed by analysts between 1999 and 2009, we find that forecasting accuracy is lower and earnings forecasts are more optimistic for firms experiencing forced CEO turnover compared to firms not undergoing such a change. However, dispersion is not statistically different. The results suggest that forced CEO turnover events provide a challenge to the forecasting environment for analysts. During CEO changes, investors should be aware that forecasts are less accurate and have an optimistic bias.     

Top Management Team Characteristics and Accrual-Based Earnings Management

This study examines how top management team (TMT) knowledge and average tenure affect accrual-based earnings management by investigating 4791 Taiwanese listed companies from 2006 to 2010. TMT members with more knowledge (higher education level, more accounting expertise, and greater prior top management experience) and longer average tenure have better performances and higher reputations, and are more aware of the litigation costs of earnings manipulations; therefore, they reduce managers' incentives to manage earnings (incentive-reduction effect). On the other hand, these TMT members are also likely to become entrenched and engage in more earnings manipulations (entrenchment-enhancing effect). The empirical results show that firms' TMT knowledge and average tenure are negatively associated with discretionary accruals, suggesting that the incentive-reduction effect is stronger than the entrenchment-enhancing effect, which makes TMT members less likely to engage in earnings management. Moreover, the above results are robust when employing different earnings management measures and suspect firm analyses, as well as considering endogeneity issues. Finally, the study suggests that the presence of a founding family may reduce the influences of TMT knowledge and average tenure on earnings management.     

International Cross-Listing, Firm Performance, and Top Management Turnover: A Test of the Bonding Hypothesis

We examine a primary outcome of corporate governance, namely, the ability to identify and terminate poorly performing CEOs, to test the effectiveness of U.S. investor protections in improving the corporate governance of cross-listed firms. We find that firms from weak investor protection regimes that are cross-listed on a major U.S. Exchange are more likely to terminate poorly performing CEOs than non-cross-listed firms. Cross-listings on exchanges that do not require the adoption of stringent investor protections (OTC, private placements, and London listings) are not associated with a higher propensity to remove poorly performing CEOs.     

高管校友关系与业绩预测披露行为

本文考察高管对个人社会关系的依赖是否对上市公司的信息环境产生冲击;具体的,本文系统论证了高管校友关系和上市公司信息披露的重要载体—管理层业绩预测之间的关系.结果显示,当公司与其供应商的高管之间存在校友关系或校友关系更广泛时,公司发布管理层业绩预测的概率和频数均显著下降,即高管校友一定程度上取代了业绩预测,成为了供应链上的信息流通渠道.进一步分析显示,当公司的私有信息成本较高或经营环境更不确定时,校友关系对业绩预测的替代作用更强;而当供应商议价能力较强时,这种替代作用显著下降.此外,本文发现高管校友关系也显著降低了业绩预测发布的自愿性和及时性.最后,本文发现校友关系引起的业绩预测披露减少,削弱了外部信息使用者获取公司层面信息的程度,表现为股价同步性和分析师预测分歧度加大.本文结果表明,高管对个人社会关系的依赖降低了上市公司的信息环境质量,可能使中小投资者处于更弱势的地位,一定程度上损害了市场公平性.本文将个人社会关系的经济影响拓展到信息环境领域,为社会关系如何影响公开信息披露行为提供了新的经验证据.     

The Long-Run Stock Returns Following Bond Ratings Changes

Using essentially all Moody's bond ratings changes between 1970 and 1997, we find no reliable abnormal returns following upgrades. However, we find negative abnormal returns on the magnitude of 10 to 14 percent in the first year following downgrades. Additional results reveal that this underperformance is especially pronounced for small, low-credit-quality firms. Also, downgrades underperform in nearly all years in the sample, and a large part of the abnormal returns occur at subsequent earnings announcements. Thus, the evidence suggests that the poor returns result from an underreaction to the announcement of downgrades, rather than from lower systematic risk.     

Price Comovement and Institutional Performance Following Large Market Movements

This paper investigates the price comovement of stocks actively traded by institutions and the investment performance of foreign and domestic institutional investors in Taiwan's stock markets during periods of large market movements. Stocks of small size, high share turnover, and high return volatility tend to move together with the market when markets rise sharply. In short-term holdings, foreign investors and domestic mutual funds can outperform the market by trading small-size, high-turnover, and high-volatility stocks.     

“拷问”绩效管理

目前许多企业实行了绩效管理,但在一些企业,尤其国有企业,绩效管理的作用和效果并不像预期中那样好。水土不服南橘北枳绩效管理之所以在很多国内企业出现＂水土不服＂,难以见到实效,原因存在于以下方面：首先,绩效管理深受中国传统文化和社会制度的影响。中国传统文化讲究＂中庸之道＂,强调社会关系的和谐。在这样的文化背景和企业氛围下,管理者＂好好先生＂的定位和被管理者＂不患寡而患不均＂的心态,使得考核特别困难。绩效考核还涉及面子问题。     

The Performance of Internet Firms Following Their Initial Public Offering

We find that initial returns were more favorable for Internet initial public offerings (IPOs) than non–Internet firm IPOs. Since the demise of the Internet sector, the underpricing of Internet–firm IPOs is not significantly different from other IPOs.
Initial returns of Internet firms are positively and significantly related to underwriter prestige and to pre–IPO market conditions. However, initial returns after the demise of the Internet sector are not significantly related to these characteristics.
The aftermarket performance of Internet firms is initially favorable but weakens over time. Firms that experienced higher initial returns during the strong Internet cycle experience weaker aftermarket performance.     

投资者异质信念与定向增发股价长期市场表现

近年来,基于异质信念的行为金融理论已经成为国际学术界的重要研究前沿。本文结合中国资本市场特殊制度背景,首次从投资者异质信念视角实证检验了上市公司定向增发后股价长期市场表现。研究结果表明:投资者异质信念越大,上市公司实施定向增发后公司股价长期市场表现越差;当发行对象为机构投资者时,异质信念对定向增发后股价的负向作用更加显著。此外,本文还进一步发现公司定向增发后的经营业绩变化也与投资者异质信念呈显著负相关关系。本文的研究结论丰富了投资者异质信念假说在公司股权再融资领域中的研究范畴。     

An Investigation of Factors Influencing the Association between Top Management Ownership and Earnings Management

This study conjectures and shows that the level of stock ownership by top management is non-monotonically associated with managers' propensity to manage earnings. Increasing ownership from low levels decreases earnings management while ownership at high levels increases earnings management. Further, this study attempts to discern when the effects of management ownership are more salient for the firm. The results of this exploratory analysis of 15,945 firm observations over a six-year period show that the non-monotonic association between top management ownership and earnings management is significant, and hence more important, for the firm characteristics of low growth opportunities, high operating volatility, small size, frequent losses, high-technology, and low institutional ownership.     

Long-Term Performance Following Rights Issues and Open Offers in the UK

Abstract:  This study finds evidence of significant long-term underperformance following rights issues made during 1986-95 in the UK. The findings are resilient to a number of methodological controls. In contrast, our results for a smaller sample of open offers made during 1991-95 show strong positive performance over a 5-year post-issue period, implying that firms making open offers had better growth prospects than firms making rights issues. During 1986-90, a period when open offers were rarely used, firms appeared to be making rights issues to exploit overvaluation. However, this was not evident for rights issues made during 1991-95, a period when open offers were more commonly used.     

CEO Overconfidence and Long‐Term Performance Following R&D Increases

We examine the relation between Chief Executive Officer (CEO) overconfidence and significant increases in research and development (R&D) expenditures. Although prior studies reveal a significantly positive market reaction to increases in R&D expenditures in both the long and short run, we find that long‐run stock performance is positive only for firms whose CEOs are not overconfident. Our findings, which may be attributable to overinvestment and the overestimation of future cash flows, imply that R&D resulting from overconfident behavior does not provide any value to firms.     

Postbankruptcy Performance and Management Turnover

This article examines the performance of 197 public companies that emerged from Chapter 11. Over 40 percent of the sample firms continue to experience operating losses in the three years following bankruptcy; 32 percent reenter bankruptcy or privately restructure their debt. The continued involvement of prebankruptcy management in the restructuring process is strongly associated with poor post-bankruptcy performance. The substantial number of firms emerging from Chapter 11 that are not viable or need further restructuring provides little evidence that the process effectively rehabilitates distressed firms and is consistent with the view that there are economically important biases toward continuation of unprofitable firms.