The impact of firm strategy on performance measures used in executive compensation

Balsam, Steven; Fernando, Guy D.; Tripathy, Arindam

doi:10.1016/j.jbusres.2010.01.006

Cited by 91 publications

(94 citation statements)

References 59 publications

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“…These strategies are positioned along a continuum, with prospectors at one end and defenders at the other. Prior research on organization theory has demonstrated that prospectors have a higher level of outcome uncertainty, are plagued with more information asymmetry, and structure executive compensation that is primarily long-term and incentive-based (Rajagopalan 1997, Kothari et al 2009, Balsam et al 2011 document an increasing propensity for innovators to engage in more tax avoidance compared to their defender counterparts. Their finding is explained by the fact that firm strategies are, in part, based on firms' willingness to deal with risk and uncertainty, with prospectors being subject to more uncertainty and, hence, requiring more tax planning.…”

Section: Review Of Related Literature and Development Of Hypothesesmentioning

confidence: 99%

Auditor-provided tax services and stock price crash risk

Habib

Hasan

2015

Accounting and Business Research

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This paper examines whether auditor-provided tax services affect stock price crash risk: an important consideration for stock investors. Provision of tax services by incumbent auditors could accentuate or attenuate crash risk depending on whether such services give rise to knowledge spillover or impair auditor independence. The study investigates two channels through which tax services might affect crash risk: earnings management in tax expenses and tax avoidance. Also examined is whether the association between tax services and crash risk is moderated by the particular business strategy that organizations pursue. A two-stage model is used to control for the potential endogeneity inherent in the selection of auditors for tax services. Empirical findings reveal that auditor-provided tax services attenuate crash risk by constraining both earnings management in tax expenses and tax avoidance. Further evidence shows that auditor-provided tax services reduce crash risk for firms following innovator business strategies. Taken together, empirical findings reported in this study support knowledge spillover benefits, that is, insights gained from tax services can enhance audit effectiveness.

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Section: Review Of Related Literature and Development Of Hypothesesmentioning

confidence: 99%

Auditor-provided tax services and stock price crash risk

Habib

Hasan

2015

Accounting and Business Research

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“…For instance, an optimal executive pay contract will not only benefit firms' operations but also hedge to exogenous events -e.g. immediate switch in firm's stock options policy (Balsam et al, 2011).…”

Section: Review Of Related Literaturementioning

confidence: 99%

Does risk matter in CEO compensation contracting? Evidence from US restaurant industry

Özdemir

Kizildag

Upneja

2013

International Journal of Hospitality Management

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a b s t r a c tThe structure of compensation packages of Chief Executive Officers (CEOs) has been a significant research interest for researchers across various disciplines. In this paper, we examine a unique relationship between CEO compensation and risk (systematic risk) in the US restaurant industry. Our research question stems from the assumption that CEOs must be rewarded with a higher incentive-based compensation in high-risk profile restaurant companies in order to motivate them to perform in their full potential for mutual benefits of the CEO and shareowners. Furthermore, we investigate whether firm risk moderates the relationship between firm performance and CEO total compensation controlling for the firm size and CEO ownership. We draw our sample firms from the US restaurant industry. Findings of our study suggest that firm risk induces a higher proportion of incentive-based compensation for restaurant companies' CEOs, and firm risk does not seem to moderate the relationship between pay and performance in the restaurant industry.

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“…Such initiatives will require close monitoring of customer relationships and satisfaction. Given the findings of Balsam, et al (2011) that firms pursuing a differentiation strategy place less weight on accounting based performance measures, we expect such firms placing more emphasis on the intangible nonfinancial measures in determining the CMO's performance and compensation. Specifically, we expect the greater the investment in innovation the higher the CMO compensation.…”

Section: Firm Strategymentioning

confidence: 99%