Compensation Consultants and the Level, Composition, and Complexity of CEO Pay

2019 ◽  
Vol 95 (1) ◽  
pp. 311-341 ◽  
Author(s):  
Kevin J. Murphy ◽  
Tatiana Sandino
Keyword(s):  
Fixed Effects ◽  
Conflicts Of Interest ◽  
Data Availability ◽  
The Public ◽  
Say On Pay ◽  
Suggestive Evidence ◽  
Ceo Pay ◽  
The Impact ◽  
Equity Incentive ◽  
Jel Classifications

ABSTRACT We provide fresh evidence regarding the relation between compensation consultants and CEO pay. First, firms that employ consultants have higher-paid CEOs—this result is robust to firm fixed effects and matching on economic and governance variables. Second, while this relation is partly due to consultant conflicts of interest, it is largely explained by the impact consultants have on the composition and complexity of CEO pay plans; notably, this impact fully mediates the consultant-CEO pay relation. Third, firms with higher-paid CEOs and more complex pay plans are more likely to hire a consultant. Last, Say-on-Pay voting patterns suggest shareholders view positively the advice consultants provide, but only when consultants provide no other services. We also find suggestive evidence of boards “layering” new equity incentive plans over existing ones, thereby increasing the impact of composition and complexity on CEO pay beyond the premium the CEO would demand for bearing additional compensation risk. JEL Classifications: J33; M12; M52; M48. Data Availability: Data are available from the public sources cited in the text.

Compensation Disclosures and Corporate Governance through Shareholder Voting

2019 ◽  
Vol 32 (3) ◽  
pp. 27-48 ◽  
Author(s):  
Brian Cadman ◽  
Richard Carrizosa ◽  
Xiaoxia Peng
Keyword(s):  
Corporate Governance ◽  
Fair Value ◽  
Data Availability ◽  
Shareholder Voting ◽  
Compensation Committee ◽  
The Public ◽  
Equity Compensation ◽  
Ceo Pay ◽  
Jel Classifications

ABSTRACT There are several measures of equity compensation that may provide shareholders with distinct and useful information for evaluating CEO pay. We examine whether shareholders consider additional disclosures of equity compensation measures beyond the grant date fair value when participating in corporate governance. We find that CEO equity compensation expense, a distinct measure of equity compensation, is a determinant of shareholder voting for management sponsored equity plans and voting for directors that serve on the compensation committee. After controlling for ISS recommendations, we find that voting outcomes remain significantly related to abnormal equity compensation expense. Consistent with shareholders considering the equity compensation expense, we document that firms shorten equity compensation vesting periods when they are no longer required to disclose the equity compensation expense. Our findings suggest that shareholders rely on multiple, distinct measures of equity compensation when participating in corporate governance. JEL Classifications: M12; M52; G34. Data Availability: Data are available from the public sources cited in the text.

Do Career Concerns Affect the Delay of Bad News Disclosure?

2017 ◽  
Vol 93 (2) ◽  
pp. 61-95 ◽  
Author(s):  
Stephen P. Baginski ◽  
John L. Campbell ◽  
Lisa A. Hinson ◽  
David S. Koo
Keyword(s):  
Empirical Evidence ◽  
Career Concerns ◽  
Data Availability ◽  
Bad News ◽  
Severance Pay ◽  
The Public ◽  
Ex Ante ◽  
Theoretical Evidence ◽  
The Impact ◽  
Jel Classifications

ABSTRACT Theory argues that career concerns (i.e., concerns about the impact of current performance on contemporaneous and future compensation) encourage managers to withhold bad news disclosure. However, empirical evidence regarding the extent to which a manager's career concerns are associated with a delay in bad news disclosure is limited. Across multiple proxies for career concerns, we find that the extent to which managers delay bad news is positively associated with their level of career concerns. Then, we hand-collect data on a compensation contract that firms use to reduce CEOs' career concerns (i.e., ex ante severance pay agreements). We find that if managers receive a sufficiently large payment in the event of dismissal, they no longer delay the disclosure of bad news. Overall, our findings support prior theoretical evidence that managers delay bad news disclosure due to career concerns and suggest a mechanism through which firms can mitigate the delay. JEL Classifications: M12; M41. Data Availability: Data are available from the public sources cited in the text.

Large Shareholder Incentives and Auditor Choice

2019 ◽  
Vol 38 (3) ◽  
pp. 203-222 ◽  
Author(s):  
Shanshan Zhang ◽  
Kangtao Ye ◽  
Yijing Cui ◽  
Wenjiao Zang
Keyword(s):  
Fixed Effects ◽  
Data Availability ◽  
Legal Environment ◽  
Auditor Choice ◽  
The Public ◽  
Large Shareholder ◽  
Large Shareholders ◽  
Declining Demand ◽  
Share Structure ◽  
The Impact

SUMMARY This study investigates the impact of large shareholder incentives on firms' auditor choice using a quasi-natural experiment setting provided by the split share structure reform in China. The reform converted the previously non-tradable shares held by large shareholders into tradable shares and thus enhanced the alignment of large shareholders' and outside investors' interests. We find that firms switch from large auditors to small auditors following the completion of the reform. The results are robust to the audit firm merging effect and the firm fixed effects. Further analyses reveal that the effect is more pronounced in firms with greater agency costs prior to the reform and in firms located in a weak legal environment. Taken together, these results suggest that a reduction in conflicts between large shareholders and outside investors leads to a declining demand for high-quality audits. JEL Classifications: M42; G34. Data Availability: Data are available from the public sources cited in the text.

Tax-Advantaged Trust Use Among IPO Executives: Determinants and Implications for Valuation and Future Performance

2019 ◽  
Vol 95 (3) ◽  
pp. 145-175 ◽  
Author(s):  
Michael J. Dambra ◽  
Matthew Gustafson ◽  
Phillip J. Quinn
Keyword(s):  
Stock Price ◽  
Relevant Information ◽  
Data Availability ◽  
Market Prices ◽  
The Public ◽  
Future Performance ◽  
Estate Taxes ◽  
Price Appreciation ◽  
One Year ◽  
Jel Classifications

ABSTRACT We examine the prevalence and determinants of CEOs' use of tax-advantaged trusts prior to their firm's IPO. Twenty-three percent of CEOs use tax-advantaged pre-IPO trusts, and share transfers into tax-advantaged trusts are positively associated with CEO equity wealth, estate taxes, and dynastic preferences. We project that pre-IPO trust use increases CEOs' dynastic wealth by approximately $830,000, on average. We next examine a simple model's prediction that trust use will be positively related to IPO-period stock price appreciation. We find that trust use is associated with 12 percent higher one-year post-IPO returns, but is not significantly related to the IPO's valuation, filing price revision, or underpricing. This evidence is consistent with CEOs' personal finance decisions prior to the IPO containing value-relevant information that is not immediately incorporated into market prices. JEL Classifications: D14; G12; G32; M21; M41. Data Availability: Data are available from the public sources cited in the text.

Auditors and the Principal-Principal Agency Conflict in Family Controlled Firms

2020 ◽  
Vol 39 (4) ◽  
pp. 31-55
Author(s):  
Chiraz Ben Ali ◽  
Sabri Boubaker ◽  
Michel Magnan
Keyword(s):  
Risk Assessment ◽  
Negative Relationship ◽  
Audit Fees ◽  
Data Availability ◽  
Audit Risk ◽  
Controlling Shareholder ◽  
Voting Power ◽  
The Public ◽  
Agency Conflict ◽  
Jel Classifications

SUMMARY This paper examines whether multiple large shareholders (MLS) affect audit fees in firms where the largest controlling shareholder (LCS) is a family. Results show that there is a negative relationship between audit fees and the presence, number, and voting power of MLS. This is consistent with the view that auditors consider MLS as playing a monitoring role over the LCS, mitigating the potential for expropriation by the LCS. Therefore, our evidence suggests that auditors reduce their audit risk assessment and audit effort and ultimately audit fees in family controlled firms with MLS. Data Availability: Data are available from the public sources cited in the text. JEL Classifications: G32; G34; M42; D86.

Impact of trade facilitation reforms on tax revenue

2017 ◽  
Vol 44 (5) ◽  
pp. 765-780 ◽  
Author(s):  
Sena Kimm Gnangnon
Keyword(s):  
Developing Countries ◽  
Fixed Effects ◽  
Data Availability ◽  
Empirical Literature ◽  
Future Research ◽  
Tax Revenue ◽  
Trade Facilitation ◽  
Content Type ◽  
The World ◽  
The Impact

Purpose The purpose of this paper is to contribute to the empirical literature of the macroeconomic effect of trade facilitation reforms by examining the impact of the latter on tax revenue in both developed and developing countries. The relevance of the topic lies on the fact that at the Bali Ministerial Conference of the World Trade Organization (WTO) in 2013, Trade Ministers agreed for the first time since the creation of the WTO (in 1995) on an Agreement to facilitate trade around the world, dubbed Trade Facilitation Agreement (TFA). The study considers both at-the-border and behind-the border measures of Trade Facilitation. Design/methodology/approach To conduct this study, the authors rely on the literature related to the structural factors that explain tax revenue mobilization. The authors mainly use within fixed effects estimator. The analysis relies on 102 countries (of which 23 industrial countries) over the period 2004-2007 (based on data availability). A focus has also been made on African countries, within the sample of developing countries. Findings The empirical analysis suggests evidence of a positive and significant effect of trade facilitation reforms on non-resources tax revenue, irrespective of the sample of countries considered in the analysis. Research limitations/implications This finding should contribute to dampening the fear of policymakers in developing countries, including Africa that the implementation of the TFA would entail higher costs, without necessarily being associated with higher benefits. An avenue for future research would be to extend the period of the study when data would be available. Originality/value To the best of the authors knowledge, this study had not been performed in the literature of the determinants of tax revenue mobilization, although fact-based analysis was performed.

XBRL Mandate and Timeliness of Financial Reporting: Do XBRL Filings Take Longer?

2018 ◽  
Vol 15 (1) ◽  
pp. 57-75 ◽  
Author(s):  
Hui Du ◽  
Kean Wu
Keyword(s):  
Multivariate Analysis ◽  
Financial Reporting ◽  
Annual Reports ◽  
Small Companies ◽  
Filing Date ◽  
The Public ◽  
Business Reporting ◽  
The Impact ◽  
Jel Classifications

ABSTRACT This study examines the impact of the Securities and Exchange Commission's (SEC) XBRL (eXtensible Business Reporting Language) mandate on the timeliness of financial reporting, measured by the reporting lag between fiscal period end and the filing date. Using annual and quarterly filing data from 2007 to 2014, we compare the reporting lags of XBRL reports to the lags of non-XBRL reports in three separate filing categories as defined by the SEC. The results show that by using XBRL the reporting lag is shortened by one to two days when companies file annual reports while the reporting lag is shortened by one day in quarterly filings. However, the results are manifest for both large accelerated filers and accelerated filers. In the multivariate analysis, we do not observe the improved reporting lag when using XBRL among non-accelerated filers. While we provide the evidence that the XBRL mandate improves the timeliness of financial reporting for large filers, we question the public policymaking of the XBRL mandate that has the intention of benefiting small companies and their investors. JEL Classifications: D83; G14; G18; M48; Z18

Friends in Need Are Friends Indeed: An Analysis of Social Ties between Financial Analysts and Mutual Fund Managers

2018 ◽  
Vol 94 (1) ◽  
pp. 153-181 ◽  
Author(s):  
Zhaoyang Gu ◽  
Zengquan Li ◽  
Yong George Yang ◽  
Guangqing Li
Keyword(s):  
Mutual Fund ◽  
Social Ties ◽  
Financial Analysts ◽  
Data Availability ◽  
Fund Manager ◽  
Mutual Fund Managers ◽  
Business Decisions ◽  
The Public ◽  
Fund Managers ◽  
Jel Classifications

ABSTRACT We examine how hometown, school, and workplace ties between financial analysts and mutual fund managers affect their business decisions. We show that a fund manager is more likely to hold stocks covered by analysts with whom she is socially connected, and that she also makes higher profits from these holdings. Such social tie-related holding returns are higher among more opaque firms. In return, a fund manager tends to cast her star analyst votes in favor of her connected analysts, and her fund company is more likely to allocate trading commissions to her connected analysts' brokerages. Additional tests indicate that analysts more actively acquire information (through conducting corporate site visits) and issue more optimistically biased recommendations for stocks held by fund managers with whom they are connected. Overall, our results illustrate the pronounced influence of social networks on the behaviors of analysts and fund managers. JEL Classifications: G10; G23; M40. Data Availability: Data are available from the public sources cited in the text.

Investor Sentiment for Corporate Social Performance

2018 ◽  
Vol 94 (4) ◽  
pp. 401-420 ◽  
Author(s):  
James P. Naughton ◽  
Clare Wang ◽  
Ira Yeung
Keyword(s):  
Corporate Social Performance ◽  
Social Performance ◽  
Abnormal Returns ◽  
Investor Sentiment ◽  
Data Availability ◽  
Time Varying ◽  
The Public ◽  
Valuation Uncertainty ◽  
Corporate Social ◽  
Jel Classifications

ABSTRACT We document time-varying investor sentiment for corporate social responsibility (CSR) performance. We show that announcements of CSR activities generate positive abnormal returns during periods when investors place a valuation premium on CSR performance. In addition, we find that firms boost CSR performance in response to investor sentiment, and that this response is more pronounced for those firms that are more inclined to respond to investor sentiment due to valuation uncertainty and investor horizon. Our results suggest that investor sentiment plays a role in firms' commitment to CSR. JEL Classifications: M41; D82; G14; G30; G31; G32; G34. Data Availability: Data are available from the public sources cited in the text.

scholarly journals COPERNICUS KNOWLEDGE AND INNOVATION HUBS

2020 ◽  
Vol XLIII-B5-2020 ◽  
pp. 35-42
Author(s):  
B. Riedler ◽  
S. Lang ◽  
P. Zeil ◽  
M. Miguel-Lago ◽  
C. Schröder ◽  
...  
Keyword(s):  
Knowledge Exchange ◽  
Data Availability ◽  
Public And Private ◽  
The Public ◽  
Active Involvement ◽  
Free Data ◽  
Financial Framework ◽  
Uptake Process ◽  
The Impact ◽  
And Training

Abstract. Copernicus, the European Space program ensures free data availability and the organisational and financial framework to provide standardized information products in its service domains atmosphere, marine, land monitoring, climate change, emergency management and human security. A key to success to the market uptake process is knowledge exchange among all actors from the various sectors involved, notably research and educational institutions, industry, and the public sector. As a successful instrument to foster and stimulate this exchange, maximize the impact and additionally boost related capacity building and training activities, the Copernicus Academy has been anchored in the European Space Strategy. The present paper highlights some key activities to leverage the potential of this dynamically growing network of experts from universities and research institutions, public and private organizations, companies, stakeholders, and increase the benefit to its members. The vision of establishing both physical implementations of regional Copernicus hubs and virtual Copernicus hubs, built on key elements of the European Innovation strategy, is discussed. Regional hubs, attached e.g. to centres of excellence, are essential to meet local needs for exchange and training to boost the user uptake. The increasing importance of virtual hubs is becoming evident as a critical means to maximise synergies among actors in the rapidly advancing technological areas. Proposed technical elements demonstrate innovative solutions to visualize and facilitate easy harvesting of the Copernicus Academy member´s expertise for different stakeholder and the public, and show cast possibilities of active involvement and exchange within the network.

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