Pay for Performance? Government Regulation and the Structure of Compensation Contracts

Perry, Tod; Zenner, Marc

doi:10.2139/ssrn.60956

Cited by 100 publications

(129 citation statements)

References 40 publications

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“…The choice of year 1992 also has certain advantages. It is the last year before a change was made in the tax code regarding deductibility of nonincentive compensation (Perry and Zenner, 2001). This tax code change may have altered subsequent compensation mixes from their unconstrained optimums.…”

Section: Datamentioning

confidence: 99%

Lease Financing and Corporate Governance

Robicheaux

Ligon

2008

The Financial Review

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Lease financing is a well-recognized mechanism for reducing the agency costs of debt. This study examines whether firms that attempt to control the agency costs of equity through strong governance structures, including Chief Executive Officer compensation alignment and board structure, are more likely to use an agency cost reducing debt structure, such as leasing. For a sample of large firms, we find that firms who use more incentive compensation and have more outside directors also tend to use more lease financing, suggesting these agency cost reducing measures are complements. Copyright (c) 2008, The Eastern Finance Association.

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Section: Datamentioning

confidence: 99%

Lease Financing and Corporate Governance

Robicheaux

Ligon

2008

The Financial Review

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“…Prior research documents a substitution effect between compensation components (e.g., Perry and Zenner 2001;Harris and Livingstone 2002), and we can generally expect a similar effect in the case of perks. Because some perks are not monetary (e.g., the use of the corporate jet), the full amount may not be substituted.…”

Section: Substitution Between Perks and Other Compensation Componentsmentioning

confidence: 61%

“…We expect this effect to reduce the implicit contracting costs described above. Perry and Zenner (2001) and Harris and Livingstone (2002) observe a similar effect when they study the 1992 tax legislation that caps the corporate income tax deduction of non-performance-related compensation at $1 million (IRS tax code 162(m)). The authors note that the law had the perverse effect of raising the compensation of CEOs who earned less than $1 million; in effect, the cap set a target.…”

Section: Empirical Predictionsmentioning

confidence: 76%

The Economic Consequences of Perk Disclosure

Grinstein

Weinbaum

Yehuda³

2017

Contemporary Accting Res

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In December 2006, the SEC issued new rules requiring enhanced disclosure by public U.S. firms of perquisites granted to their executives. The rules applied to perquisites granted in fiscal year 2006 and thereafter. Because the rules were implemented quickly, the perks disclosed for 2006 reflect the arrangements firms made under prior disclosure rules: firms could not revise perks to reflect the new rules until 2007. For firms that disclose for the first time in 2006, we predict and find that perks decrease in 2007, reflecting both the costs of increased disclosure and enhanced monitoring. This decrease in perks is offset by higher levels of non‐perk compensation, however. We also predict and find that the effect of perk disclosure by formerly non‐disclosing firms in 2006 leads to higher perks in 2007 for firms that were disclosing perks prior to the rule change.

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“…Prior literature has demonstrated the use of cash flows from operations in compensation contracts (Leon, 2004;Nwaeze et al, 2006;Perry & Zenner, 2001). Nwaeze et al (2006) In particular, we find that cash flows from operations is mentioned as a possible performance metric for CEO cash compensation in 41.51% of the sample firms for which cash compensation data could be obtained from the proxy statements.…”

Section: Cash Versus Non-cash Compensationmentioning

confidence: 68%

Executive compensation and cash contributions to defined benefit pension plans

Cheng

Swenson

2018

Business Fin & Account

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Cash contributions to defined benefit pension (DB) plans reduce cash flows from operations without directly affecting the current year's net income. We utilize this unique setting to investigate how managerial incentives to report higher cash flows from operations, executive compensation in particular, affect contributions. Using a comprehensive dataset of DB plan contributions, we find that firms with higher chief executive officer (CEO) compensation contribute less to DB plans, consistent with managers benefiting from lower pension contributions. Results are stronger when CEO compensation is directly linked to cash flows from operations or when CEO compensation is more sensitive to cash flows from operations. We also find enhanced disclosure and more transparent reporting under the recent pension accounting regime mitigates the negative association between executive compensation and cash contributions.

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Pay for Performance? Government Regulation and the Structure of Compensation Contracts

Cited by 100 publications

References 40 publications

Lease Financing and Corporate Governance

Lease Financing and Corporate Governance

The Economic Consequences of Perk Disclosure

Executive compensation and cash contributions to defined benefit pension plans

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