scholarly journals Asymmetric pay-for-performance and corporate governance in the market downturn

2007 ◽  
Vol 4 (4) ◽  
pp. 193-205
Author(s):  
Tung-Hsiao Yang
Keyword(s):  
Corporate Governance ◽  
Stock Market ◽  
Executive Compensation ◽  
Pay For Performance ◽  
Market Performance ◽  
Debt Ratio ◽  
Supportive Evidence ◽  
Market Conditions ◽  
Managerial Power ◽  
Market Changes

This paper examines the pay-for-performance, corporate governance, and their connection by analyzing the change of executive compensation when the stock market changes from upturn to downturn. We provide the evidence to support the managerial power explanation for the change in executive compensation. We find the asymmetric pay-for-performance and corporate governance in different market conditions and different firm’s market performance. In addition, the outperformed firms reward CEO with more cash-based compensation and less stock-based compensation in the market downturn. Therefore, we conclude that the CEOs of outperformed firms have stronger managerial power than those of underperformed firms. We also find supportive evidence of our conclusion that the firms with lower debt ratio, smaller number of board meetings, and the presence of interlocked relationship have higher probability to be the outperformed firms. This evidence is consistent with the prediction of managerial power approach

Positive Corporate Governance and its Implications for Executive Compensation

2005 ◽  
Vol 6 (12) ◽  
pp. 1777-1804 ◽  
Author(s):  
James McConvill
Keyword(s):  
Corporate Governance ◽  
Executive Compensation ◽  
Best Practice ◽  
Pay For Performance ◽  
Negative Perception ◽  
High Profile ◽  
Exponential Increase ◽  
Self Interest ◽  
The Common ◽  
Common Perception

As a result of a series of high-profile corporate collapses worldwide, along with regular reporting of shareholder money being spent on corporate jets, executive golf days and increasingly excessive executive compensation arrangements, the common perception is that the executives of our largest corporations are driven by self-interest with little regard for what is best for the corporation. Due to this negative perception, there has been an exponential increase in the amount of laws, rules and guidelines setting in place a heightened standard of corporate governance best practice. Without such regulation, it is believed, another collapse or scandal is inevitable. In this article, I dispute this reasoning. In my view if we embrace “positive corporate governance”, in which the positive strengths and virtues of company executives are emphasised, we can move towards an environment in which heavy regulation is replaced by positive corporate norms inside the corporation. I then apply my approach of positive corporate governance to address one of the most significant issues confronting corporate regulation at present- how to deal with the rapid increase in executive compensation in our largest corporations. I suggest that the dominant methodology of pay for performance is ultimately flawed.

scholarly journals Corporate governance and market cap destruction: A predictive model

2015 ◽  
Vol 12 (2) ◽  
pp. 659-665
Author(s):  
Hugh Grove ◽  
Maclyn Clouse
Keyword(s):  
Corporate Governance ◽  
Stock Market ◽  
Predictive Model ◽  
Gold Mining ◽  
Market Performance ◽  
Company Performance ◽  
Market Capitalization ◽  
Mining Companies ◽  
Stock Market Performance ◽  
The U.S

By focusing on specific board variables, both company performance and stock market performance have been investigated and a more comprehensive corporate governance approach has been advocated to help improve such performances (Larcker et al. 2007 and Grove et. al. 2011). In this paper, we extend such analyses by investigating a relationship between such corporate governance variables and market capitalization. We specifically integrate corporate governance variables into a predictive model for market capitalization (cap) destruction, using the example of the largest six (“Big 6”) gold mining companies publicly-listed in the U.S.

Managerial power, agency cost and executive compensation – an empirical study from China

2016 ◽  
Vol 10 (1) ◽  
pp. 119-137 ◽  
Author(s):  
Xiaohong Zhang ◽  
Gaowen Tang ◽  
Zhaohong Lin
Keyword(s):  
Stock Market ◽  
Executive Compensation ◽  
Listed Companies ◽  
Agency Cost ◽  
Senior Executives ◽  
Compensation Contracts ◽  
Content Type ◽  
Optimal Contracting ◽  
Managerial Power ◽  
The Relationship

Purpose Based on the theory of “optimal contracting approach” and “the managerial power approach”, this paper aims to investigate whether senior executives of listed companies in China make use of their power to gain their own private benefits. The paper also compares compensation contracts between state- and private-owned enterprises to test whether there is a significant difference between senior executives from different ownership types of enterprises in terms of compensation contracts. Design/methodology/approach The paper raises four hypotheses based on the theories of “company agency”, “optimal contracting approach” and “managerial power approach”. After that, 5,680 A-share-listed companies of stock market in Shanghai and in Shenzhen Stock Market from 2008 to 2012 were taken as research samples to conduct a series of research analysis, including t-test, reliability analysis and regression analysis, with the help of SPSS 18.0. Findings The senior executives of listed companies in China could make use of their power to increase their own salary to gain power pay and, at the same time, company performance, company size and other factors that are important to influence the executive compensation. This paper further argues that senior executives of private-owned listed companies are more likely to use their power to obtain power pay and increase their own compensation. Additionally, the agency costs of Chinese listed companies are negatively related to the performance pay of senior executives, whereas there is no obvious negative correlation with the power pay of senior executives. Practical implications This paper takes multiple, in-depth approaches to study the relationship among managerial power, agency cost and executive compensation and to find out the differences in compensation contracts of senior executives between private-owned listed companies and state-owned companies. It also provides necessary suggestions to ensure the interests of stockholders, such as: optimizing the management structure of listed companies; improving the transparence of information disclosure of listed companies; establishing effective mechanism of incentive and constraint; and improving and standardizing the market of professional managers. Social implications The compensation contract of senior executives in China is critical to enhance enterprises’ performance, and it will become an important factor that will facilitate the interests of stockholders and management. However, this paper argues that some phenomena of over-payment of senior executives in listed companies cannot be explained by the theory of “optimal contracting approach”, but it is necessary and important to compare the differences of compensation contract of senior executives between private-owned listed companies and state-owned companies. A series of findings are proposed in this paper. Originality/value This paper made use of a principal analysis to extract the main factors that could represent the managerial power from different angles. In addition, this paper also compared the differences between compensation contracts of senior executives between private-owned listed companies and state-owned companies. Additionally, in this paper, the compensation of senior executives was divided into “power compensation” and “performance compensation”, which were used to test the relationship with the management cost of companies.

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.

Market conditions will delay Russian sell-offs

2016 ◽  
Keyword(s):  
Corporate Governance ◽  
Stock Market ◽  
Budget Deficit ◽  
Partial Solution ◽  
Market Environment ◽  
Market Conditions ◽  
Content Type ◽  
Privatisation Programme

Subject Russia's delayed privatisation programme. Significance A privatisation programme seen as the partial solution to Russia's budget problems has been slow to take off, despite the prominent companies listed for sale. The only success to date is the partial sale of diamond miner Alrosa in July. Oil major Rosneft is hoping to acquire the smaller Bashneft, but may be prevented from doing so as it is state-controlled itself. Rosneft itself is due to undergo partial privatisation. Impacts The shortfall in privatisation proceeds will complicate efforts to curb the 2016 budget deficit. Investors will mostly be granted minority stakes, limiting their say in transparency and corporate governance. The subdued stock market environment and limited Western bidding creates opportunities for Asian investors.

scholarly journals Executive Remuneration in New Zealand and Australia - Do Current Laws, Regulations and Guidelines Ensure "Pay for Performance"?

2006 ◽  
Vol 37 (1) ◽  
pp. 31
Author(s):  
Andreas Schoenemann
Keyword(s):  
Corporate Governance ◽  
New Zealand ◽  
Board Of Directors ◽  
Pay For Performance ◽  
Theoretical Background ◽  
Executive Directors ◽  
Executive Remuneration ◽  
Managerial Power ◽  
The Board Of Directors ◽  
Regulations And Guidelines

This article undertakes an examination of the current corporate governance frameworks relating to the remuneration of executives, and particularly executive directors, of listed companies in New Zealand and Australia. The theoretical background of the article builds on agency theory and managerial power theory. On this basis, performance-related remuneration is identified as crucial in aligning the divergent interests of shareholders and executives. Theories also suggest that the board of directors alone is not a sufficient mechanism to ensure that performance-related pay is implemented in practice. Examination of substantive remuneration rules regarding the structure and form of remuneration agreements finds that in both New Zealand and Australia the relevant problems are only sparsely addressed in enforceable law. More emphasis is put on procedural remuneration rules. Particularly in the fields of disclosure and shareholder involvement, Australia is a step ahead of New Zealand. 

scholarly journals Editorial: Geographical insights of the corporate governance research

2021 ◽  
Vol 18 (4) ◽  
pp. 4-6
Author(s):  
Alexander Kostyuk
Keyword(s):  
Corporate Governance ◽  
Stock Market ◽  
Mergers And Acquisitions ◽  
Executive Compensation ◽  
Board Of Directors ◽  
International Comparison ◽  
Corporate Ownership ◽  
Recent Issue ◽  
The Board Of Directors ◽  
And Control

The recent issue of Corporate Ownership and Control journal contains both empirical and review papers describing the wide variety of corporate governance issues from the board of directors and executive compensation to mergers and acquisitions, stock market and institutional investors. The geographical representation of the papers provides an excellent opportunity for international comparison.

scholarly journals The impact of internal governance mechanisms on financial and stock market performance of listed companies: Evidence from an emerging market

2020 ◽  
Vol 9 (4) ◽  
pp. 126-138
Author(s):  
Houcine Berbou ◽  
Oumaima Sadqi
Keyword(s):  
Corporate Governance ◽  
Stock Market ◽  
Emerging Market ◽  
Market Performance ◽  
Listed Companies ◽  
Governance Mechanisms ◽  
Internal Governance ◽  
Internal Governance Mechanisms ◽  
Stock Market Performance ◽  
The Impact

The aim of this paper is to empirically test the impact of internal governance mechanisms on the financial and stock market performance of Moroccan listed companies. Board of directors’ characteristics such as independence and transparency, concentration, and presence of employees in the ownership structure, as well as some cognitive aspects of governance, represent the basis for discussion. Secondary data of a sample of 44 listed companies in the Casablanca Stock Exchange was analyzed using multiple linear regression. The results of this empirical study revealed that the financial and stock market performance of the companies that are captured by the return on equity (ROE) and the market to book ratio (M to B) significantly correlate with the adoption of the hybrid corporate governance approach. The relevance of this study is to enrich researches that deal with corporate governance and its impact on business performance in the context of Moroccan listed companies.

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