Agency models in different stages of CEO tenure: The effects of stock options and board independence on R&D investment

2016 ◽  
Vol 45 (2) ◽  
pp. 560-575 ◽  
Author(s):  
Fabio Zona
Keyword(s):  
Stock Options ◽  
Board Independence ◽  
Ceo Tenure ◽  
Agency Models ◽  
D Investment

scholarly journals CEO Tenure, Corporate Social Performance, and Corporate Governance: A Korean Study

2019 ◽  
Vol 12 (1) ◽  
pp. 99
Author(s):  
Jun Hyeok Choi ◽  
Saerona Kim ◽  
Ayoung Lee
Keyword(s):  
Corporate Governance ◽  
Good Governance ◽  
Corporate Social Performance ◽  
Social Performance ◽  
Chief Executive ◽  
Ordinary Least Squares ◽  
Board Independence ◽  
Board Diversity ◽  
Ceo Tenure ◽  
Corporate Social

The purpose of this study was to examine the association between Chief Executive Officer (CEO) tenure and corporate social performance with the moderating effect of governance. We investigated whether new CEOs and CEOs in their last year of service were more focused on short-termism than CEOs of other periods. Specifically, we tested whether these CEOs reduced social performance that demands immediate expenditure and expect payoffs in the long run. We also tested whether good governance can mitigate such behaviors, because not all CEOs of the same tenure will act the same, depending on the monitoring environments surrounding them. We employed ordinary least squares (OLS) method and the moderator models using data from the Korean listed companies from 2012 to 2016. Test results showed that only the CEOs of their last year reduced social performance. However, when we considered corporate governance, we found that both groups of CEOs reduced social performance, and that good governance mitigated the adverse effects of the two periods on Corporate Social Responsibility (CSR). Specifically, we tested board independence, board frequency, CEO duality, and board diversity, and found that, for all but board independence, the negative effects of the two periods on social performance were decreased.

Family Ownership, Board Independence, and R&D Investment

2009 ◽  
Vol 22 (4) ◽  
pp. 347-362 ◽  
Author(s):  
Hsiang-Lan Chen ◽  
Wen-Tsung Hsu
Keyword(s):  
Corporate Governance ◽  
Investment Decisions ◽  
Family Influence ◽  
Family Ownership ◽  
Board Independence ◽  
Independent Director ◽  
Asian Countries ◽  
Ceo Duality ◽  
D Investment

Family influence is central in Asian countries; however, little research exists regarding the effects of family ownership and corporate governance on corporate investment decisions. This article examines the relationships among family ownership, board independence, and R&D investment using a sampling of Taiwanese firms. The finding of the negative family ownership—R&D investment relationship suggests that family ownership may discourage risky long-term R&D investment. Such a finding may also suggest that firms with high family ownership may use R&D investment more efficiently and thus need less R&D in relation to firms with low family ownership. In addition, the interaction of family ownership and CEO duality/independent director ratio is negatively/positively related to R&D investment, suggesting that firms with high family ownership may increase R&D investment when the CEO—chair roles are separated or when more independent outsiders are included in the board.

Cashing-in: understanding post-acquisition CEO stock option exercise

2015 ◽  
Vol 53 (9) ◽  
pp. 1953-1975 ◽  
Author(s):  
John S. Marsh ◽  
William J. Wales ◽  
Rachel Graefe-Anderson ◽  
Marshall W. Pattie
Keyword(s):  
Stock Options ◽  
Design Methodology ◽  
Stock Option ◽  
Exercise Behavior ◽  
Future Research ◽  
Acquisition Performance ◽  
Content Type ◽  
Compensation Management ◽  
Ceo Tenure ◽  
Practical Implications

Purpose – The purpose of this study is to explore post-acquisition compensation management and examine how the two most commonly used theories to explain CEO stock option exercise, agency theory and CEO overconfidence, expect CEOs to manage their stock options following an acquisition. Design/methodology/approach – Using logistic regression analysis, the authors investigate whether CEOs are more or less likely to exercise options following an acquisition, and the effect which CEO tenure and acquisition history may have on option exercise. Findings – The results suggest that CEOs are more likely to exercise options following an acquisition. The authors also find that CEO tenure and acquisition experience are both linked to an increase in option exercise. Research limitations/implications – The findings suggest that future research should expect agency effects to outweigh overconfidence effects when considering CEO stock option exercise behavior within the post-acquisition firm context. Practical implications – This paper advises directors and shareholders about whether agency concerns or overconfidence are of greater concern and how CEO tenure and past acquisition history may influence post-acquisition CEO stock option exercise behavior, offering information valuable in designing effective corporate governance. Originality/value – This paper is among the first to explore how CEOs manage their options following an acquisition and finds that CEOs are more likely to exercise stock options following an acquisition. Post-acquisition compensation management is an important, though overlooked, consideration in improving acquisition performance.

scholarly journals An Examination Of The Effectiveness Of CEO Stock Option Granting Decisions Toward R&D Investments?

2011 ◽  
Vol 5 (12) ◽  
Author(s):  
Minna Yu
Keyword(s):  
Stock Options ◽  
Stock Option ◽  
Stock Ownership ◽  
Firm Characteristics ◽  
Financial Leverage ◽  
Growth Opportunities ◽  
Managerial Risk ◽  
Incentive Problems ◽  
D Investment ◽  
Compensation Committees

Stock options are used to motivate investments in risky projects, such as R&D investments. When compensation committees make granting decisions to stimulate R&D spending, they should consider the following firm characteristics: (1) a firm’s growth opportunities; (2) a firm’s financial leverage; and (3) the CEO’s stock ownership prior to stock option grants. This paper addresses the effectiveness of CEO stock option granting decisions by examining whether compensation committees take these three factors into account. Using a recent sample over the period of 1992-2006, we find that firms with greater growth opportunities and firms in lower financial leverage are more likely to award CEO stock options to motivate R&D investment. These findings are consistent with that options are designed effectively to motivate managerial risk taking, thereby aligning the interests of managers with those of shareholders. However, contrary to our prediction, compensation committees tend to grant more to CEOs with larger stock ownership to induce R&D spending. A potential explanation for this finding is that CEOs with relatively large stock ownership affect the granting process and grant themselves with excessive stock options. Taken together, the evidence of CEO stock option granting process partially supports the notion that firms make effective stock option plans to mitigate incentive problems of risk-averse managers.

Stock option pay versus restricted stock: A comparative analysis of their impact on managerial risk-taking and performance extremeness

2018 ◽  
Vol 18 (2) ◽  
pp. 301-329 ◽  
Author(s):  
Wanrong Hou ◽  
Steve Lovett ◽  
Abdul Rasheed
Keyword(s):  
Comparative Analysis ◽  
Risk Taking ◽  
Stock Options ◽  
Stock Option ◽  
Large Sample ◽  
Managerial Risk ◽  
Ceo Tenure ◽  
Restricted Stock ◽  
And Performance ◽  
Using Data

This study investigates how two stock-based incentives affect the risk-taking behavior of CEOs. We compare stock options and restricted stock in terms of their impact on the magnitude of investments and performance extremeness. We test our hypotheses using data for 23 years starting from 1993 for a large sample of S&P 1500 firms. Our results indicate that both stock option and restricted stock pay increase the magnitude of investments undertaken by CEOs, but that stock options have a much stronger effect. Also, stock option pay increases the likelihood of both big gains and big losses, but restricted stock reduces the likelihood of big losses. Finally, we find that as CEO tenure increases, the effects of stock-based compensation tend to diminish. Therefore, stock-based incentives appear to be a useful solution to the agency problem for short-tenured CEOs, but much less so for long-tenured CEOs.

CEO Tenure and R&D Investment

2013 ◽  
Vol 49 (4) ◽  
pp. 437-459 ◽  
Author(s):  
Hsiang-Lan Chen
Keyword(s):  
Ceo Tenure ◽  
D Investment

scholarly journals The impact of corporate governance mechanisms on financial reporting transparency

2017 ◽  
Vol 14 (3) ◽  
pp. 25-33 ◽  
Author(s):  
Samin Kohansal ◽  
Shoeyb Rostami ◽  
Zeynab Rostami
Keyword(s):  
Corporate Governance ◽  
Earnings Management ◽  
Financial Reporting ◽  
Institutional Ownership ◽  
Board Independence ◽  
Governance Mechanisms ◽  
Management Behavior ◽  
Ceo Tenure ◽  
Corporate Governance Mechanisms ◽  
The Impact

Corporate governance has been raised as one of the most important issues among the international business environment since the beginning of the twenty-first century. At first, corporate governance basic principles focused on firm’s strategies and the rights of their shareholders but these principles has been changed into the rights of all stakeholders and society through researchers new viewpoints. Although corporate governance codes and regulations are different in various countries, there is a common unanimity that better compliance of corporate governance improves financial reporting quality and transparency. The aim of this paper is to investigate the impact of corporate governance mechanisms on financial reporting transparency in Tehran Stock Exchange over a seven year period (from 2006 to 2012). Besides we have specially reviewed related researches and topics about corporate governance in various countries which their results were discussed in different parts of the article. In order to examine the hypothesis a sample of 67 companies is used. In this paper we used ownership concentration, institutional ownership, board independence, board size, CEO duality and CEO tenure as the corporate governance mechanisms. We also used earnings management behavior by employing Kasznik model (the absolute value of abnormal accruals) as a measure of financial reporting transparency. To test research hypothesis a multiple regression with estimated generalized least square method is employed. The findings indicate that ownership concentration, institutional ownership, board independence and CEO tenure has positively affected financial reporting transparency through earnings management behavior. On the other hand board size and CEO duality has negatively affected financial reporting transparency through earnings management behavior.

Stock Options, R&D, and the R&D Tax Credit

2008 ◽  
Vol 83 (3) ◽  
pp. 705-734 ◽  
Author(s):  
Jennifer L. Brown ◽  
Linda K. Krull
Keyword(s):  
Stock Options ◽  
Stock Option ◽  
Tax Credits ◽  
Tax Credit ◽  
Earnings Benchmarks ◽  
Tax Benefits ◽  
Reported Earnings ◽  
D Investment

Two separate streams of research find evidence that firms decrease R&D spending to meet earnings benchmarks and that the R&D tax credit increases R&D spending. However, these studies do not consider stock option exercises by R&D employees that likely influence R&D spending decisions because they increase R&D tax credits without reducing reported earnings. This study extends both areas of research by incorporating R&D tax credits from stock option exercises into the R&D spending decision. We find evidence that firms reduce R&D spending by 0.46 percent of total assets to avoid earnings decreases, but R&D tax credits generated by stock option exercises offset this decrease by 16 percent on average and up to 42 percent for a fully taxable firm. The results of this study suggest that the tax benefits of R&D-related stock option exercises are important considerations in studies that investigate myopic R&D investment and in studies that investigate the effect of the R&D tax credit on R&D spending.

DISCUSSION OF: Examining Shareholder Value Creation over CEO Tenure: A New Approach to Testing Effectiveness of Executive Compensation

2011 ◽  
Vol 23 (1) ◽  
pp. 29-36 ◽  
Author(s):  
Dan Weiss
Keyword(s):  
Executive Compensation ◽  
Performance Studies ◽  
Value Creation ◽  
Stock Options ◽  
Pay For Performance ◽  
Executive Pay ◽  
New Approach ◽  
Ceo Tenure ◽  
Executive Incentives ◽  
Managerial Power

ABSTRACT The executive compensation literature has explored the executive pay-for-performance relation in various contexts and reported mixed findings. As a result, the question of whether executive incentives, and particularly stock options, are effective continues to pose a puzzle to researchers. Gong (2011) uses a long window to examine effectiveness of executive compensation. This note discusses several broad aspects of pay-for-performance studies and their potential manifestation in this line of research and in Gong's study. Specifically, I elaborate on measurement issues and on each of the following aspects: (1) the underlying paradigm: arm's-length contracting versus managerial power; (2) the distinction between the pay-for-performance relationship and CEO overpay; (3) market efficiency; and (4) the settling-up problem.

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