Non-uniform effects of CEO equity-based compensation on firm performance – An application of a panel threshold regression model

Kuo, Chii-Shyan; Li, Ming-Yuan Leon; Yu, Shang-En

doi:10.1016/j.bar.2013.06.008

Cited by 18 publications

(7 citation statements)

References 72 publications

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“…Previous studies also suggest that the level of executive pay can be influenced by firm-specific characteristics, such as firm size (Kuo et al, 2013;Bryson et al, 2014;Conyon, 2014 andNewton, 2015), leverage of firm (Coles et al, 2006;Duffhues and Kabir, The determinants of CEO compensation 2008;Gete and Gomez., 2015;Alves et al, 2016 andDahiya et al, 2017) and firm risk (volatility of stock prices) (Coles et al, 2006;Sanders and Hambrick, 2007;Gormley et al, 2013 andChang et al, 2015). Therefore, we controlled for firm-level (i.e.…”

Section: Control Variablesmentioning

confidence: 99%

The determinants of CEO compensation: new insights from United States

Bouteska

Mefteh‐Wali

2021

JAAR

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PurposeThe purpose of this paper is to examine the determinants of CEO compensation for sample of the US firms. It emphasizes the presence of executive compensation persistence and the importance of CEO power besides performance while setting CEO pay.Design/methodology/approachThe empirical analysis is conducted on a large sample of US firms during the period 2006–2016. It is based on the generalized method of moments (GMM) models to assess the impact of numerous factors on CEO compensation.FindingsThe main findings reveal that firm performance proxied by accounting-based proxies, as well as market-based proxies, plays a significant role in explaining variations in levels of executive compensation. Moreover, there is a significant persistence in executive compensation among the US sample firms. The authors also document that poor governance conditions (managerial power hypothesis) lead to high compensation levels offered to CEO.Research limitations/implicationsAt the end, without a doubt, the analysis has some limitations that prompt the authors to consider future research directions. One future research avenue that can help better explain the effect of firm performance on the CEO compensation is to study this issue using an international sample to determine whether country-level characteristics (e.g. creditor rights, shareholder rights and the enforcement climate) can influence this relationship. Furthermore, it can be worthwhile to deepen the analysis of CEO power and its impact on CEO compensation. It will be interesting to emphasize how the CEO power interacts with the other governance characteristics and some CEO attributes as CEO gender.Practical implicationsThe paper's findings have implications for practitioners, policymakers and regulatory authorities. First, the findings inform regulators that performance is not the only determinant of CEO pay level. This may warrant increased firm disclosure of the details of the pay structure. Second, the study offers insights to policymakers and members of boards of directors interested in enhancing the design of executive compensation and internal corporate governance, to better align managerial incentives to shareholder interests. Firms should strengthen the board independence and properly constitute the board committees (compensation, risk, nomination…).Originality/valueThis paper presents a comprehensive overview of the CEO compensation determinants. It supplements the classic pay-for-performance sensitivity predictions with insights gained from the dynamics of wage setting theory and managerial power theory. The authors develop a composite index to measure the CEO power in order to test the impact of CEO attributes on CEO pay. Additionally, it verifies whether the determinants of CEO pay depend on firm age and size.

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Section: Control Variablesmentioning

confidence: 99%

The determinants of CEO compensation: new insights from United States

Bouteska

Mefteh‐Wali

2021

JAAR

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“…We will use the PSM index and its five sub-components as threshold variables to create the country clusters. The threshold regression technique that we adopt has been widely applied by recent researches to optimally dissect databases and see how one cluster compares with another (Van Campenhout and Cassimon, 2012; Kuo et al, 2013). Table A3 shows the results of the regression that we run on the clusters of countries with "strong" and "weak" PSM.…”

Section: Robustness Testsmentioning

confidence: 99%

Public Debt, Economic Growth, and Public Sector Management in Developing Countries: Is There a Link?

Megersa

Cassimon

2015

Public Admin. Dev.

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The article investigates whether differences in public sector management quality affect the link between public debt and economic growth in developing countries. For this purpose, we primarily use the World Bank's institutional indices of public sector management (PSM). Using PSM thresholds, we split our panel into country clusters and make comparisons. Our linear baseline regressions reveal a significant negative relationship between public debt and growth. The various robustness exercises that we perform also confirm these results. When we dissect our data set into "weak" and "strong" county clusters using public sector management scores, however, we find different results. While public debt still displayed a negative relationship with growth in countries with "weak" public sector management quality, it generally displayed a positive relationship in the latter group.The tests for non-linearity shows evidence of an "inverse-U"-shape relationship between public debt and economic growth. However, we fail to see a similar significant relationship on country clusters that account for PSM quality. Yet, countries with wellmanaged public sectors demonstrate a higher public debt sustainability threshold.

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“…The panel threshold models can also study the nonuniform links between explained variables and the explanatory variables. In addition, if the sample segmentation and non-uniform relations between the dependent variables and independent variables are jointly determined, this model can solve problems related to the assumption that sample segmentation is exogenous, which were an issue in previous studies [45]. In this paper, the panel threshold regression model is used to test the threshold effect of industrial land use efficiency on industrial carbon emissions.…”

Section: Panel Threshold Regression Modelmentioning

confidence: 99%

Spatial Threshold Effect of Industrial Land Use Efficiency on Industrial Carbon Emissions: A Case Study in China

Zhang

et al. 2021

IJERPH

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China’s industry is still in the middle of industrialization. Land use activities are crucial to the growth of carbon emissions. However, few scholars focus on the influence mechanism between industrial land use efficiency (ILUE) and industrial carbon emissions. In this paper, the threshold model and the spatial Durbin model are used to investigate the spatial threshold effect of industrial land use efficiency on industrial carbon emission from 2003 to 2018. The results show that ILUE of China’s provinces basically shows an improvement trend, with little difference in spatial distribution, showing a pattern of high in the eastern region and low in the western region. When economic development level (A) and technical level (T) are taken as the threshold variable, ILUE has a single threshold effect on industrial carbon emissions in the eastern region. In the central region, with a as the threshold variable, ILUE shows a double threshold effect on industrial carbon emission. Under the 0–1 geographical proximity weight matrix, the indirect spillover effect of ILUE on reducing regional carbon emissions is significant, and the indirect effect is even greater than that on regional carbon emissions. The spatial spillover effect is not significant in the eastern region. These findings have important practical significance for promoting regional industrial transformation and upgrading, optimizing land space and realizing high-quality economic development.

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Non-uniform effects of CEO equity-based compensation on firm performance – An application of a panel threshold regression model

Cited by 18 publications

References 72 publications

The determinants of CEO compensation: new insights from United States

The determinants of CEO compensation: new insights from United States

Public Debt, Economic Growth, and Public Sector Management in Developing Countries: Is There a Link?

Spatial Threshold Effect of Industrial Land Use Efficiency on Industrial Carbon Emissions: A Case Study in China

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