A few bad apples: An analysis of CEO performance pay and firm productivity

Bulan, Laarni T.; Sanyal, Paroma; Yan, Zhipeng

doi:10.1016/j.jeconbus.2010.02.001

Cited by 34 publications

(44 citation statements)

References 83 publications

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“…DeFusco et al (1990) demonstrate that option-holding managers are incentivized to undertake risky projects. Bulan et al (2008) and Rajgopal and Shevlin (2002) confirm that adding stock options to pay packages generally decreases aversion due to down-side protection.…”

Section: Options and Risk Takingmentioning

confidence: 73%

Managerial compensation

Goergen

Renneboog

2011

Journal of Corporate Finance

124

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We review the existing literature on managerial compensation, with particular reference to the two contrasting views about its main driver. On the one hand, managerial compensation is seen to be the result of a market-based mechanism which ensures that managers have adequate incentives to maximize shareholder value. On the other hand, it is regarded to be a means whereby self-serving executives skim corporate profits and expropriate shareholders. We find that most of the existing literature supports the latter view as executives tend to benefit from windfall earnings and are able to extract rents in the presence of weak corporate governance.

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Section: Options and Risk Takingmentioning

confidence: 73%

Managerial compensation

Goergen

Renneboog

2011

Journal of Corporate Finance

124

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“…In terms of firm characteristics, company size and growth opportunities were considered. Total assets are used as a proxy for firm size and market value ratio as a proxy for growth opportunities (Core & Guay, 1999;Leone, Wu, & Zimmerman, 2006;Carter, Lynch, & Tuna, 2007;Shaw & Zhang, 2010;Bulan, Sanyal, & Yan, 2010;Ozkan, 2011). For the industry category, the first two digits of the SIC code are used to divide the sample.…”

Section: Risk Aversion As a Ceo Traitsmentioning

confidence: 99%

CEO Traits, Corporate Performance, and Financial Leverage

Kuo¹,

Wang²,

Lin³

2014

IJEF

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This study uses a random effect panel model to examine the impact of CEO traits and compensation on earnings performance and financial leverage for the 729 listed US companies in ExecuComp over the period of 2001-2010. The results indicate that CEO cash compensation has a negative relationship with earnings performance, but that it has a positive impact on financial leverage. Moreover, for CEOs, longer tenure results in reduced earnings risk-taking for debt financing, but older CEOs generate higher earnings and increase debt capacity. In addition, it is also found that there is a negative relationship between CEO compensation and earnings for firms with poor performance. Cash compensation increases the use of debt for high leverage companies, but equity-based compensation decreases the use of debt for low leverage companies. A longer tenure and greater age also have a negative relationship with both earnings and debt financing for poor performance or low leverage companies. However, older CEOs generate more earnings and financing capacity for firms with good performance or high leverage.

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“…Managerial incentives should bridge the gap between the interest of managers versus the interest of owners (e.g. Fama & Jensen, 1983), and empirical U.S.-based evidence shows that strong incentives (stock options in general) produce higher firm productivity (Bulan, Sanyal & Yan, 2010). The implication is that companies should be paying…”

Section: Dismissal Performance Sensitivitymentioning

confidence: 99%

Globalization of Monitoring Practices: The Case of American Influences on the Dismissal Risk of European CEOS

Oxelheim

Randøy

2013

SSRN Journal

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This study examines globalization of monitoring practices by focusing on how American (U.S.) influences on European firms impact the dismissal risk for these firms' CEOs. Specifically, we argue that the stronger short term orientation of the American corporate governance system increase the dismissal performance sensitivity faced by European CEOs, indirectly and directly.The former materializes via European firms cross-listing on U.S. exchanges, the latter results from European firms hiring U.S. independent board members. Both influences are expected to result in increased dismissal performance sensitivity. Based on data from the 250 largest European publicly traded firms we find a significant increase in the dismissal sensitivity of poorly performing companies with American board members and a support for migration of American executive pay practice. However, no significant increase in dismissal performance sensitivity was identified from U.S. cross-listing. In line with our agency theory based prediction, this indicates an institutional contagion driven by the presence of U.S. board members on European corporate boards. To policy makers the message is that internationalization of boards should not be banned or restricted, since it provides owners with more options to influence the corporate governance of the firm. JEL classification:G15, G18, G32, M14, M16, M52

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A few bad apples: An analysis of CEO performance pay and firm productivity

Cited by 34 publications

References 83 publications

Managerial compensation

Managerial compensation

CEO Traits, Corporate Performance, and Financial Leverage

Globalization of Monitoring Practices: The Case of American Influences on the Dismissal Risk of European CEOS

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