Pay Performance Sensitivity
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The Dependence Of Ceo Pay Performance Sensitivity On The Size Of The Firm
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Author : Scott Schaefer
language : en
Publisher:
Release Date : 1998
The Dependence Of Ceo Pay Performance Sensitivity On The Size Of The Firm written by Scott Schaefer and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1998 with categories.
I analyze the relationship between firm size and the extent to which executive compensation depends on the wealth of the firm's shareholders. I use a simple agency model to motivate an econometric model of this relationship. Estimating this model on Chief Executive Officer compensation data using non-linear least squares, I determine that pay-performance sensitivity (as defined by Jensen and Murphy, 1990) appears to be approximately inversely proportional to the square root of firm size (however measured). I also analyze the properties of pay-performance sensitivity for quot;teamsquot; of executives working for the same firm and show it to have similar properties to CEO pay-performance sensitivity.
Pay Performance Sensitivity In A Heterogeneous Managerial Labor Market
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Author : Hui Chen
language : en
Publisher:
Release Date : 2016
Pay Performance Sensitivity In A Heterogeneous Managerial Labor Market written by Hui Chen and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2016 with categories.
The persistently low pay-performance sensitivity between executive compensation and firm performance has puzzled both practitioners and academics. We propose a hybrid model that incorporates both moral hazard and adverse selection problems to explain this puzzle. We argue that the managerial labor market is heterogeneous in nature, not homogeneous as assumed by the pure moral hazard model and empirical work based on this model. We demonstrate that the optimal pay-performance sensitivity derived from the hybrid model is lower than that derived from the pure moral hazard model. Furthermore, we also show that pay-performance sensitivity is a function of the mix of types in the market. The more capable managers there are in the market, the more likely the market's average pay-performance sensitivity is high. We then conduct an empirical test and find evidence that is consistent with the prediction of our model.
Executive Pay Performance Sensitivity And Its Consequences
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Author : Trairong Swatdikun
language : en
Publisher:
Release Date : 2013
Executive Pay Performance Sensitivity And Its Consequences written by Trairong Swatdikun and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2013 with categories.
Executive compensation has been extensively studied in market orientation economy; consequently the conflict of interest between the Principal and the Agent is clearly defined in a widely-held firm. A concentration-owned firm that dominates Asian capital markets have not such a conflict between the shareholders and the managers, but groups of shareholders in conflict are a concern. Since only one group of owner dominates the decision, executive compensation is hardly believed to be well established. Using a unique Thai listed company's data between 2002 and 2008 as a sample, this study presents empirical evidence on Agency theory outside the Anglo-Saxon setting. Ordinary least square method, fixed effects, two-stages least squares, generalised method of moments are deployed to test the hypotheses. In addition to all executive receives base pay, it reveals that bonus is the most common incentive while fewer than 10% of listed companies provide stock option to their executive. The econometric results reveal positive pay-performance sensitivity in Thai listed companies. However, ownership structure does play a vital role in the sensitivity. In a widely-held firm, the positive influence of firm performance on executive compensation is found. The evidence supports that widely-held firms have well established their executive compensation package. In the foreign-owned firm, the positive sensitivity reveals that foreign ownership actively take part in the compensation policy to serve the firm interests. Furthermore; Managerial power suggests that in the imbalance of power between groups of shareholder, there is no pay-performance sensitivity in neither family-owned nor corporate-owned firms. Further evidences indicate that operation cash flow and stock return are the consequence of executive bonus pay.
The Impact Of Human Capital On Employee Compensation And Pay Performance Sensitivity
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Author : Ozge Uygur
language : en
Publisher:
Release Date : 2015
The Impact Of Human Capital On Employee Compensation And Pay Performance Sensitivity written by Ozge Uygur and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2015 with categories.
More emphasis is put on human capital nowadays and firms are no longer defined only through their physical assets. As the human capital becomes more important, the employees require to be compensated more and the firms need to adopt their compensation contracts to this change in order to survive. In this paper, the findings suggest that compensation contracts in human capital intensive firms differ significantly from those in asset intensive firms. Executives and managers at every level receive higher levels of compensation and they get more of their pay in the form of incentive based compensation in human capital intensive firms. Such difference remains significant at all levels of management, including CEOs, other chiefs, divisional managers, and other managers. However, the largest change belongs to CEO compensation contracts. Further evaluation reveals that the pay performance sensitivity weakens in human capital intensive firms.
Too Much Pay Performance Sensitivity
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Author : Ivan E. Brick
language : en
Publisher:
Release Date : 2010
Too Much Pay Performance Sensitivity written by Ivan E. Brick and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2010 with categories.
We examine the relation between pay-performance sensitivity (PPS), the convexity of managerial compensation (Vega), and future stock risk and returns for a large sample of firms between 1992 and 2004. On average, both higher PPS and higher Vega are associated with lower future stock returns. Part of this negative relation may be due to a reduction in risk induced by risk-averse managers responding to increases in the sensitivity of their wealth to equity value. Confirming this effect, both total and idiosyncratic equity risks decrease following increases in CEOs' PPS and Vega. However, even after correcting for lower future risk, future stock returns are negatively associated with the magnitude of option sensitivity. This finding is consistent with previous studies that link high option compensation to manager-owner agency problems. The results are robust to numerous specifications and controls.
Executive Compensation Regulation And The Dynamics Of The Pay Performance Sensitivity
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Author : Ralf Sabiwalsky
language : en
Publisher:
Release Date : 2010
Executive Compensation Regulation And The Dynamics Of The Pay Performance Sensitivity written by Ralf Sabiwalsky and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2010 with categories.
A substantial number of empirical studies on the linear relationship between executive compensation and firm performance for European firms suggest that the pay-performance sensitivity is not significantly positive. We argue that a nonlinear structure fits the data better, because compensation contracts provide for minimum performance benchmarks and an upper limit to the variable component of compensation. We test for such discontinuities in the pay performance relationship, and confirm their existence, using hand collected data from German Prime All Share firms' CEO bonus compensation. It turns out that there is a significant positive relationship between return on assets and CEO bonus for ROA between -3% and +20%. Performance sensitivity is then tested for changes over time between 2006 and 2009. Results reveal that during the first three years after the introduction of a statutory transparency rule in 2005 governing the disclosure of individual CEO compensation, significant changes to compensation contracts did not occur; but that in 2009 the pay-performance sensitivity exhibited a significant increase, which coincides with the passing of a law that requires supervisory boards to ensure that new CEO employment contracts provide for "reasonable" compensation. -- Executive Compensation ; Regulation ; Pay Performance Sensitivity
Ceo Pay And Firm Performance
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Author : Paul L. Joskow
language : en
Publisher:
Release Date : 1994
Ceo Pay And Firm Performance written by Paul L. Joskow and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1994 with Chief executive officers categories.
This study explores the dynamic structure of the pay-for- performance relationship in CEO compensation and quantifies the effect of introducing a more complex model of firm financial performance on the estimated performance sensitivity of executive pay. The results suggest that current compensation responds to past performance outcomes, but that the effect decays considerably within two years. This contrasts sharply with models of infinitely persistent performance effects implicitly assumed in much of the empirical compensation literature. We find that both accounting and market performance measures influence compensation and that the salary and bonus component of pay as well as total compensation have become more sensitive to firm financial performance over the past two decades. There is no evidence that boards fail to penalize CEOs for poor financial performance or reward them disproportionately well for good performance. Finally, the data suggest that boards may discount extreme performance outcomes -both high and low - relative to performance that lies within some `normal' band in setting compensation.
Executive Pay Performance Sensitivity And Corporate Monitoring Mechanism
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Author : 陳珮綺
language : en
Publisher:
Release Date : 2014
Executive Pay Performance Sensitivity And Corporate Monitoring Mechanism written by 陳珮綺 and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2014 with categories.
Ceo Prior Uncertainty And Pay Performance Sensitivity
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Author : Jiyoon Lee
language : en
Publisher:
Release Date : 2017
Ceo Prior Uncertainty And Pay Performance Sensitivity written by Jiyoon Lee and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017 with categories.
CEOs' pay-performance sensitivity (delta) is higher in the first year after being hired than in the following years. I explain this finding with reference to CEO prior uncertainty: due to information asymmetry and/or uncertainty about the quality of the match between a CEO and a firm, first-year compensation is often arranged to depend largely on performance. Consistent with this explanation, CEOs with higher prior uncertainty exhibit higher first-year delta: First-year delta is higher for outsider CEOs than insider CEOs. Among outsider CEOs, first-year delta is lower for former executives of large public firms and older CEOs. An insider CEO's service time in a firm prior to becoming the CEO reduces first-year delta.
Pay Performance Sensitivity Before And After Sox
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Author : Hui Chen
language : en
Publisher:
Release Date : 2014
Pay Performance Sensitivity Before And After Sox written by Hui Chen and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2014 with categories.
The purpose of this paper is to investigate the impact on pay-performance sensitivity of the Sarbanes-Oxley Act. We compare managers' pay-performance sensitivity before and after 2001-2002, a period during which regulatory changes were initiated to increase scrutiny over managerial manipulation and improve financial reporting quality. Based on ExecuComp data from 1992 to 2005 (and excluding the years 2001 and 2002), our results show that pay-performance sensitivity using either market-based or accounting-based measures of performance increased significantly following these events. When we further decompose executive pay into its cash-based and equity-based components, we find evidence of an increase in the link between performance and executive compensation for five of six measures for each performance metric. The evidence presented here is consistent with an improvement in the perceived credibility of reported earnings and an increased reliance on earnings in compensation contracts, which in turn resulted in an increase in the link between executive compensation and shareholder wealth.