Family ownership,corporate governance,and top executive compensation

In this study we investigate how top management pay is determined in a family firm environment where even listed firms are effectively controlled by a single individual or a single family. Using data from Hong Kong, we find that executive directors' pay is reduced if the directors have substantial stockholdings. Moreover, pay is related to profits but not to stock returns. Our results are consistent with external blockholders and independent non‐executive directors persuading firms to base top management compensation on a firm's profitability. Copyright © 2006 John Wiley & Sons, Ltd.     

Human Capital and CEO Compensation during Institutional Transitions

Firms appoint CEOs with different types of human capital in order to manage resource dependencies. How CEOs are compensated thus can be conceptualized as a valuation process of how boards view the value of CEOs' human capital. Two types of human capital – international experience and political ties – have emerged as potential drivers of CEO compensation during institutional transitions. But how they impact CEO compensation has remained unclear. We develop a resource dependence‐based, contingency framework to focus on the external and internal factors that enable or constrain human capital to impact CEO compensation. Because of the tremendous regional diversity within China, externally, we focus on the level of marketization of the region in which firms are headquartered. Internally, we pay attention to two corporate governance mechanisms: politically connected outside directors and compensation committee. Data from 10,329 firm‐year observations at 94 per cent of listed firms in China largely support our framework. Overall, our study contributes to resource dependence research by extending this research to the context of institutional transitions with a focus on how human capital impacts CEO compensation.     

Board Effectiveness and CEO Pay: Board Information Processing Capacity,Monitoring Complexity,and CEO Pay‐for‐Performance Sensitivity

We have developed an information processing theory of board effectiveness to examine board‐chief executive officers (CEOs) pay relations. We theorize that CEO pay reflects the information processing context of boards. Boards have limited information processing capacity and therefore prefer to use outcome‐based CEO pay when they have difficulty in processing information for monitoring their CEOs. Using a longitudinal sample of Standard and Poor's (S&P's) large‐, medium‐, and small‐cap manufacturing firms in the United States from 1998 through 2005, we found support for our theory. Large boards and boards in less complex monitoring contexts tend to link CEO pay less tightly to firm performance by providing less stock‐based incentives, and the tendency of large boards to decrease outcome‐based CEO pay is even greater when boards are not busy or when boards are in less complex monitoring contexts. © 2015 Wiley Periodicals, Inc.     

Who Appoints Them,What Do They Do? Evidence on Outside Directors from Japan

Although reformers often claim Japanese firms appoint inefficiently few outside directors, the logic of market competition suggests otherwise. Given the competitive product, service, and capital markets in Japan, the firms that survive should disproportionately be firms that tend to appoint boards approaching their firm‐specifically optimal structure. The resulting debate thus suggests a test: do firms with more outsiders do better? If Japanese firms do maintain suboptimal numbers of outsiders, then those with more outsiders should outperform those with fewer; if market constraints instead drive them toward their firm‐specific optimum, then firm characteristics may determine board structure, but firm performance should show no observable relation to that structure. We explore the issue with data on the 1000 largest exchange‐listed Japanese firms from 1986 to 1994. We first ask which firms tend to appoint which outsiders to their boards. We find the appointments decidedly nonrandom. Firms appoint directors from the banking industry when they borrow heavily, when they have fewer mortgageable assets, or when they are themselves in the service and finance industry. They appoint retired government bureaucrats when they are in construction and sell a large fraction of their output to government agencies, and they appoint other retired business executives when they have a dominant parent corporation or when they are in the construction industry and sell heavily to the private sector. Coupling OLS regressions with two‐stage estimates on a subset of the data, we then ask whether the firms with more outside directors outperform those with fewer, and find that they do not. Instead, the regressions suggest—exactly as the logic of market competition predicts—that firms choose boards appropriate to them.     

Top Management Compensation and Shareholder Returns: Unravelling Different Models of the Relationship

In order to further examine the relationship between executive pay and company performance, this paper investigates the linkage between two separate components of executive compensation (i.e. cash compensation and stock options) and market return performance, among a selected sample of US pharmaceutical company CEOs and COOs. In the surveyed sample, changes in cash compensation were found to exhibit a between-firm relationship with lagged market returns, while Δ stock option grants displayed a within-firm relationship. The former result suggests a commonality in practices across all firms, while the latter denotes idiosyncratic firm-specific practices. These contrasts represent different degrees of the agency problem in the contracts for cash compensation as compared to the stock option components. Levels of cash compensation were affected primarily by firm size. Market returns were not instrumental influences on the levels of both compensation components     

Incentive Alignment,CEO Pay Level,and Firm Performance: A Case of “Heads I Win,Tails You Lose”?

In recent years, rewarding CEOs with long‐term forms of compensation (e.g., stock options, performance plans, restricted stock) has become more popular than using year‐end pay adjustments. Surprisingly, there is little empirical evidence to support the benefits of this trend. This study found that the benefits of long‐term compensation flowed primarily to CEOs as they received significantly greater levels of total compensation than CEOs in firms that emphasized year‐end pay adjustments. Paradoxically, however, firms that emphasized year‐end pay adjustments performed significantly better than firms that were heavy users of long‐term forms of contingent compensation. © 2001 John Wiley & Sons, Inc.     

Intra‐firm differentiation of compensation systems: evidence from US high‐technology firms

While scholars have long recognised the influence of firm decisions on aspects of compensation (e.g. pay level and pay mix), prior compensation studies offer an ambiguous understanding regarding their scope. Some studies argue that firms customise compensation decisions according to employee groups, whereas others assume that firm compensation decisions apply uniformly throughout a firm. To address this research gap, the current study analyses pay levels and pay mixes for R&D employees and administrative employees in US high‐technology firms. Our empirical analyses show that firms make distinct compensation decisions for these two job families, but these decisions are ultimately consistent. These findings highlight firms' intention to strike a balance between customising compensation systems according to employee groups and maintaining internal consistency. Our findings add interesting insights to the strategic HRM and talent management literatures, which claim that firms should differentiate among employees when designing HRM systems.     

Executive compensation and gender: S&;P 1500 listed firms

We examine if a gender gap persists in executive compensation and if the composition and the determinants of executive compensation for men versus women are the same for the S&P1500 listed firms during the period from 1992 to 2004. This analysis is also extended to high tech firms, where high scholarship is required both for male and female executives. The results reveal that the gender gap in executive compensation is reducing essentially after the year 2000. Also, the factors that explain the variation in executive compensation are not all the same for men and women. However, firms continue to pay women, who are considered more risk averse than men, a similar proportion of risky compensation components, such as stock options and restricted stocks, than they pay to men. In terms of technology firms, we find that the gender differences in total compensation are not statistically significant. Our study offers insight into recent data for executive compensation. The finding that the gender gap diminishes is a sign of a better functioning market for executives. Our findings could be potentially useful for compensation committees in order to develop compensation packages that take into consideration the degree of risk aversion in order to enhance performance. Compensation adjusted for risk aversion can produce a higher level of satisfaction for the employees and can lead to better performances. Future research should focus on international comparison of various dimensions of executive compensation.     

The remuneration of CEOs and corporate financial performance in Norway

Economics and management literatures advocate that senior company executives should be remunerated on the basis of the financial performance of the firms they manage. This helps align the interests of management with those of stockholders. There are, however, problems in implementing pay for performance schemes and these, along with other factors, may lead to there being no empirical relationship between compensation and stockholder returns. This study set out to explore the determinants of chief executive compensation in Norwegian stock exchange listed firms. To date there have been very few studies on this topic using data from Norway; most previous research has employed American data. The results show a positive relationship between CEO pay and corporate size but there was no significant association between remuneration and corporate financial performance as measured by accounting profitability and as measured by stock returns. Estimates of the value added by companies were significantly related to chief executive pay. There was also a positive and significant relationship between a CEO's compensation and the average wage level of the company. This association may be due to the unique characteristics of Norway's social and economic structure.     

Managerial Agency Costs of Socialistic Internal Capital Markets: Empirical Evidence from China

This study provides empirical evidence of managerial agency costs in socialistic internal capital markets. Listed Chinese companies are required to disclose the amount of resources that are reallocated to other firms of the parent company, which provides us with a direct measure of the socialistic subsidization of weak member firms by strong member firms within a business group. We hypothesize that in strong member firms, managerial compensation is less sensitive to firm performance because cross‐subsidization makes it difficult for group CEOs to hold the managers in strong firms accountable for their own firms' performance, and also increases the noise in performance measures. We also hypothesize that socialistic cross‐subsidization results in an increase in managerial agency costs of strong member firms due to the low pay‐performance sensitivity and low incentive to work hard. We document empirical results that are consistent with these two predictions.     

CEO optimism,CEO selection,compensation, and corporate investment decision: The case of CEOs who were rehired as CEOs by another firms after turnover

What happens to CEOs after they are let go by their firm? This study is designed to investigate CEOs who are rehired as CEOs by another firms after turnover. CEOs defined as “moderately optimistic” and those who left voluntarily from their departing firms, are younger, have better prior performance, and work in larger firms are found to have a greater likelihood of being rehired as a CEO by another employer. Moreover, new-hire firms with higher growth opportunity and higher R&D expenditures are found to be significantly more willing to hire overconfident CEOs. Furthermore, more-optimistic CEOs are found to receive higher total compensation from their new-hire firms than CEOs who are less optimistic. Finally, overconfident CEOs working in firms with high growth opportunity and higher R&D show a significantly greater tendency toward increasing firm investment.     

Chief executive officer attributes,sustainable performance,environmental performance,and environmental reporting: New insights from upper echelons perspective

This study examines the impact of chief executive officer (CEO) attributes on sustainable performance, environmental performance, and environmental reporting, which are motivated by institutionally driven environmental policies, regulations, and management in the context of Chinese listed firms. With the use of a comprehensive dataset of 2,854 Chinese listed firms over the 2010–2017 period (i.e., making over 16,000 individual firm‐year observations), our findings are fourfold. First, our overall findings reveal that CEOs with research background tend to engage more in activities that improve sustainable performance, environmental performance, and environmental reporting than do those without research background. Second, CEOs with financial expertise are positively linked with increased sustainable performance and environmental reporting. Third, CEOs with foreign exposure are more eager to engage in activities that enhance sustainable and environmental performance than do those without foreign exposure. Fourth, young CEOs tend to take actions that reduce both sustainable and environmental performance than do their older counterparts. We interpret our results within upper echelons theoretical perspective. The results are robust to alternative measures, potential endogeneities, and sample selection problems.     

CEO贫困出身、薪酬激励与企业风险承担

本文利用2007—2017年沪深A股上市公司数据,考察CEO的贫困出身对企业风险承担的影响,并基于薪酬异质性和薪酬公平性两个维度进一步探究薪酬激励在其中的调节作用,研究发现：（1）CEO的贫困出身显著抑制企业风险承担,表现出风险规避型性格特征;（2）将薪酬激励细化为股权激励和货币薪酬,非国有企业中,股权激励显著提高贫困出身CEO的风险承担意愿,而高额的货币薪酬则显著加剧贫困出身CEO的风险规避倾向,但国有企业贫困出身CEO的风险承担意愿与薪酬激励不存在显著相关关系;（3）基于薪酬公平性视角,非国有企业中,贫困出身CEO的薪酬总额低于行业平均水平越多,其风险承担意愿提升越显著,但若其薪酬总额高于行业平均越多,则会显著加剧其风险规避倾向,并且这种效应不存在于国有企业样本中。上述结论在考虑内生性影响后依然稳健。     

CEO Stock‐Based Incentive Compensation and Firm Performance: A Quantile Regression Approach

This study employs the quantile regression model to examine the non‐monotonic impact of CEO stock‐based compensation on firm performance, using the data for U.S. non‐financial firms from 1993 to 2005. The results indicate that while the impact of CEO stock‐based pay on firm performance is positive for firms in the higher earnings quantile levels, the impact is negative for firms in the lower levels. In addition, the “V‐shaped” relationship between CEO stock‐based pay and firm performance satisfactorily explains the longstanding disagreement among earlier studies with regard to whether CEO stock‐based pay can enhance firm performance. Furthermore, the quantile‐varying pattern of the impact of stock‐based compensation on firm performance is robust after controlling for the industrial and yearly effects. It is also robust to the use of the pay‐for‐performance sensitivity as an alternative explanatory variable or the market‐based measure of performance as the dependent variable, or the consideration of the suspected endogenous problem between firm performance and stock‐based compensation.     

CEO Retirement,Corporate Governance and Conditional Accounting Conservatism

Based on 16,604 observations between 1994 and 2006, this study revisits the ‘horizon problem’ by examining how CEO retirement affects conditional accounting conservatism. We hypothesize and find that firms become less conservative in their financial reporting before the retirement of their CEOs, and that strong corporate governance mitigates the effect of CEO retirement. The literature concerning the horizon problem has suggested that CEOs manipulate earnings to boost short-term performance before they leave their companies (Dechow, P. M., & Sloan, R. G. (1991). Executive incentives and the horizon problem: An empirical investigation. Journal of Accounting and Economics, 14(1), 51–89; Smith, C. W., & Watts, R. L. (1982). Incentive and tax effects of executive compensation plans. Australian Journal of Management, 7(2), 139–157), but the evidence is mixed. By examining conditional conservatism, we avoid some of the methodological difficulties that confront researchers when examining either real or accrual earnings management. Ours is the first study to provide evidence on how the horizon problem shapes conditional accounting conservatism.     

Does CEO compensation matter in boosting firm performance? Evidence from listed French firms

The paper investigates the impact of chief executive officer (CEO) compensation on firm performance from a sample of 155 listed French companies on SBF 120, over 2009–2018. Findings suggest that an increase in CEO compensation seems to improve the accounting‐based firm performance, nevertheless it hurts the firm stock market value. More pronounced results are reported when we control for sector compensation interactions. We argue that attractive compensation may improve the executive services in achieving shareholders' objectives, but investors seem to not appreciate a CEO compensation increase. Based on the agency theory, it might be argued that investors fear possible executive opportunistic behavior encouraging them to enjoy overcompensation .     

The Value of CEO Mobility: Contextual Factors That Shape the Impact of Prior CEO Experience on Market Performance and CEO Compensation

This study examines the value that prior CEO experience has for the companies that hire such CEOs—as reflected in the firms’ subsequent market‐based performance—as well as its value for the CEO that possesses this experience—as reflected in his or her initial compensation. While we suggest that shareholders tend not to benefit from firms hiring experienced CEOs, we also argue that particular firm and industry contextual factors that shaped the prior CEO experience help ameliorate this detrimental effect. Regardless, we also suggest that prior CEO experience generally stands to benefit the CEOs, in that it brings them a compensation premium over those CEOs without such prior experience. We tested our hypotheses on a sample of 654 US CEO succession events that occurred between 2001 and 2004 and found broad support for our hypotheses. We close with a discussion of the implications of our findings for future research as well as what they mean for firms hiring experienced CEOs and for CEO careers more generally. © 2015 Wiley Periodicals, Inc.     

The Economic Consequences of Increased Disclosure: Evidence from Cross-Listings of Chinese Firms

In this paper, we investigate the impact of cross‐listings on information asymmetry risk, the cost of capital and firm value of a group of cross‐listed Chinese companies. Our paper is the first to examine the effect of cross‐listing on information asymmetry risk. Because cross‐listed firms are subject to increased disclosure requirements, increased regulatory scrutiny and increased legal liability, we propose that Chinese cross‐listed firms have lower information asymmetry risk, lower cost of capital and higher firm value than their non‐cross‐listed counterparts. We find in both univariate and multivariate tests that cross‐listed firms enjoyed lower information asymmetry risk in the domestic market compared with the non‐cross‐listed firms. We also find that cross‐listed firms have lower cost of capital in the cross‐listing market than non‐cross‐listed firms in the domestic markets. Finally, we find that cross‐listed firms are associated with higher firm value as measured by Tobin's Q. These results have implications for international investors and companies seeking cross‐listing opportunities.     

Unionization and CEO turnover

This article investigates whether unions have power to influence turnover of poorly performing chief executive officers (CEOs). Employing the transparency coalition framework, we develop hypotheses regarding CEO tenure given unionization, performance-turnover sensitivity, and firm performance following CEO turnover. We use Cox regression and a data set of US firms from 1993 to 2013 to show that CEO turnover is accelerated at firms that unionize. Discontinuity analysis suggests that the relationship is causal. Overall, the results show the significance of unions in the key corporate governance event of CEO turnover and suggest that, though they may proceed independently and for their own traditional goals of good pay and job conditions for their members, unions can be allies of investors and boards or directors when it comes to removing underperforming CEOs.     

Managerial incentives and R&D investments: The moderating effect of the directors’ and officers’ liability insurance

Literature regarding the impact of managerial incentives on firm’s research and development (R&D) investments suggests that due to the riskiness of R&D activities, firms need to provide managerial incentives to encourage managerial discretion on corporate long-term investments of R&D. In spite that managerial incentives influence corporate R&D spending, some also argue corporate R&D spending a function of managerial incentive schemes. This paper applies the simultaneous equation to investigate the association between managerial discretion on R&D investments and the incentive scheme of CEO compensations by using the sample firms listed in Taiwan Security Exchange and Taipei Exchange. The results indicate that the listed firms in Taiwan simultaneously determine corporate R&D investments and CEO compensations. They reward their CEOs in compliance with their efforts on R&D investments and CEO compensation motivates CEOs to align their interests with firms’ long-term investments on R&D. A further analysis of the protection effect from the directors’ and officers’ (D&O) liability insurance suggests that D&O protection intensifies the relationship between R&D investments and CEO compensation. It encourages CEOs to allocate resources on R&D activities and make CEO incentive contracts efficacious on corporate long-term investments. The result is robust in the electronic industry of Taiwan.