Effects of Executive Share Option Plans on Shareholder Wealth and Firm Performance: The Singapore Evidence

The main purpose of our paper is to study the institutional nature and characteristics of executive share option plans (ESOPs) in Singapore, a fast-growing economy and an important investment location in Asia. Our study provides an interesting comparison between the characteristics of ESOPs in Singapore and those in the US. Our paper also investigates the short-term market reaction to ESOP announcements and the long-run stock and operating performance of the sample firms following the adoption of the ESOPs. Results indicate weak evidence of a positive abnormal return on the days surrounding the announcement of the ESOPs. However, there is no evidence of long-term superior stock and operating performance for the ESOP firms relative to benchmarks. The lack of significant incentive effects for the sample firms reflects mainly the unique regulatory environment in Singapore.     

Trade credit and cost stickiness

Using a large sample of US data, we examine the relation between trade credit and cost behaviour and further investigate the moderating effects on this relation of agency problem, product market competition, and customer concentration. We find that firms using high levels of trade credit exhibit lower cost stickiness and this is prevalent in the high agency problem sub‐sample. In addition, in a non‐competitive market, where the agency problem arises owing to lack of competition, trade credit plays an external monitoring role by attenuating cost stickiness. However, high customer concentration curtails this monitoring ability.     

Executive pay dispersion,corporate governance,and firm performance

Much of the research on management compensation focuses on the level and structure of executives’ pay. In this study, we examine a compensation element that has not received so far considerable research attention—the dispersion of compensation across managers—and its impact on firm performance. We examine the implications of two theoretical models dealing with pay dispersion—tournament versus equity fairness. Tournament theory stipulates that a large pay dispersion provides strong incentives to highly qualified managers, leading to higher efforts and improved enterprise performance, while arguments for equity fairness suggest that greater pay dispersion increases envy and dysfunctional behavior among team members, adversely affecting performance. Consistent with tournament theory, we find that firm performance, measured by either Tobin’s Q or stock performance, is positively associated with the dispersion of management compensation. We also document that the positive association between firm performance and pay dispersion is stronger in firms with high agency costs related to managerial discretion. Furthermore, effective corporate governance, especially high board independence, strengthens the positive association between firm performance and pay dispersion. Our findings thus add to the compensation literature a potentially important dimension: managerial pay dispersion.

Overcoming Consumer Skepticism in Cause-Related Marketing: The Effects of Corporate Social Responsibility and Donation Size Claim Objectivity

Even though cause-related marketing has become an increasingly popular marketing tool, consumers have become skeptical about this strategy. Consumer skepticism is likely to lower the acceptance of advertising claims. The current study investigates how marketers might minimize consumer skepticism by varying the level of perceived corporate social responsibility and the level of claim objectivity regarding donation size. The results indicated that consumers were more likely to disbelieve the ad claim when the advertiser was perceived to be socially irresponsible than responsible. In addition, consumers were more likely to disbelieve the ad claim when the donation size was stated subjectively than objectively.