Summary The rapid development of new biotechnologies allows us to deeply understand biomedical dynamic systems in more detail and at a cellular level. Many of the subject-specific biomedical systems can be described by a set of differential or difference equations which are similar to engineering dynamic systems. In this paper, motivated by HIV dynamic studies, we propose a class of mixed-effects state space models based on the longitudinal feature of dynamic systems. State space models with mixed-effects components are very flexible in modelling the serial correlation of within-subject observations and between-subject variations. The Bayesian approach and the maximum likelihood method for standard mixed-effects models and state space models are modified and investigated for estimating unknown parameters in the proposed models. In the Bayesian approach, full conditional distributions are derived and the Gibbs sampler is constructed to explore the posterior distributions. For the maximum likelihood method we develop a Monte Carlo EM algorithm with a Gibbs sampler step to approximate the conditional expectations in the E-step. Simulation studies are conducted to compare the two proposed methods. We apply the mixed-effects state space model to a data set from an AIDS clinical trial to illustrate the proposed methodologies. The proposed models and methods may also have potential applications in other biomedical system analyses such as tumor dynamics in cancer research and genetic regulatory network modeling.

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We study the relationship between CEO pay-performance sensitivity, pay-risk sensitivity, and shareholder voting outcomes as part of the "say-on-pay" provision of the 2010 US Dodd-Frank Act. Consistent with our hypothesis, we provide evidence that shareholders tend to approve of compensation packages that are more sensitive to changes in stock price (pay-performance sensitivity). Our findings are consistent with theoretical predictions that outside owners approve of equity incentives as a means of aligning managers' interests with those of shareholders. We also document that future changes to equity-based incentives are related to voting outcomes and that shareholders incorporate CFO incentives into their votes.Collectively, these results provide evidence of the importance of equity-based incentives from the perspective of those most concerned with firm value and of the effectiveness of say-on-pay as a governance mechanism.

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