Accounting and Stock Price Performance in Dynamic CEO Compensation Arrangements

2003 ◽  
Vol 78 (1) ◽  
pp. 143-168 ◽  
Author(s):  
John F. Boschen ◽  
Augustine Duru ◽  
Lawrence A. Gordon ◽  
Kimberly J. Smith
Keyword(s):  
Firm Performance ◽  
Stock Price ◽  
Ceo Compensation ◽  
Accounting Performance ◽  
Financial Gain ◽  
Price Performance ◽  
Long Run ◽  
Initial Effect ◽  
Ceo Pay

In this study we examine the long-run effects of unexpected firm performance on CEO compensation. We find that unexpectedly good accounting performance is initially associated with increases in CEO pay. However, this initial effect soon reverses, and is followed by lower CEO pay in later years. Overall, the CEO's long-run cumulative financial gain from unexpectedly good accounting performance is not significantly different from zero. In contrast, unexpectedly good stock price performance is associated with increases in CEO pay for several years. Thus, the CEO's long-run cumulative financial gain from unexpectedly good stock price performance is positive and significant.

scholarly journals CEO Compensation and Firm Performance: The Role of ESG Transparency

2020 ◽  
Vol 4 (2) ◽  
pp. 278
Author(s):  
Chetna Rath ◽  
Florentina Kurniasari ◽  
Malabika Deo
Keyword(s):  
Firm Performance ◽  
Chief Executive Officers ◽  
Ceo Compensation ◽  
Negative Relationship ◽  
Chief Executive ◽  
Long Run ◽  
Ceo Pay ◽  
Executive Officers ◽  
The Impact

Chief executive officers (CEOs) of environmental, social, and governance (ESG) firms are known to take lesser pay and engage themselves in corporate social responsibility activities to achieve the dual objective of the enhancement of firm’s performance as well as benefit for stakeholders in the long run. This study examines the role of ESG transparency in strengthening the impact of firm performance on total CEO pay in ESG firms. A panel of 67 firms for the period of 2014–2019 has been analyzed using the two-step system GMM model, with NSE Nifty 100 ESG Index as the data sample and ESG scores from Bloomberg database as a proxy for transparency. Findings reveal that environmental and governance disclosure scores have the potential to intensify the negative relationship between firm performance and CEO compensation, while social disclosure scores do not. In addition, various firm-specific, board-specific, and CEO-specific attributes have also been considered controls affecting remuneration. This paper contributes to the literature by exploring the effect of exhibiting ESG transparency and its nexus with CEO pay as well as firm performance.

scholarly journals CEO Pay For Long-Run Performance: A Dynamic View

2014 ◽  
Vol 31 (1) ◽  
pp. 317 ◽  
Author(s):  
Ji-Young Ahn
Keyword(s):  
Firm Performance ◽  
Dynamic Response ◽  
Ceo Compensation ◽  
Complete Convergence ◽  
Partial Adjustment ◽  
Incentive Effects ◽  
Long Run ◽  
Dynamic View ◽  
Ceo Pay ◽  
One Year

This study examines multi-year dynamic response of CEO compensation to firm performance. Multi-period agency theories posit that the CEO's current performance can be compensated both today and tomorrow. This study investigates the dynamic view of CEO pay and firm performance by using partial adjustment models of CEO pay. We find that target pay levels are set on long-run past firm performance and that the deviation of the actual pay level causes near-complete convergence to the target in one year. Overall, the findings here indicate that a pay-for-contemporaneous-only-performance relationship significantly understates the incentive effects of CEO pay.

Debt Structure Adjustments and Long-run Stock Price Performance

2000 ◽  
Author(s):  
Sudip Datta ◽  
Mai E. Iskandar-Datta ◽  
Kartik Raman
Keyword(s):  
Stock Price ◽  
Debt Structure ◽  
Price Performance ◽  
Long Run

scholarly journals IFRS adoption and CEO compensation: evidence from listed banks in Nigeria

2019 ◽  
Vol 14 (3) ◽  
pp. 1-8 ◽  
Author(s):  
Stephen Ojeka ◽  
Alex Adegboye ◽  
Dorcas Titilayo Adetula ◽  
Kofo Adegboye ◽  
Inemesit Udoh
Keyword(s):  
Financial Reporting ◽  
Ceo Compensation ◽  
Panel Data Analysis ◽  
Fixed Effect Model ◽  
Positive Influence ◽  
Performance Measure ◽  
Governance Mechanism ◽  
Accounting Performance ◽  
Ifrs Adoption ◽  
Ceo Pay

The study investigates the influence of International Financial Reporting Standards adoption, using accounting performance measure, to determine the CEO pay in listed banks in Nigeria. The audited annual financial statements of listed banks in Nigeria covering the period of 2009–2015 are analyzed. Fixed effect model, viz panel data analysis is adopted to establish the findings. The findings indicate that adoption of IFRS in Nigeria results in an inverse relationship with accounting performance in determining the CEO compensation after controlling for firm and corporate governance mechanism. However, the adoption of IFRS shows significant positive influence on the CEO pay. This result has policy implication, which encourages the regulatory agencies like Central Bank of Nigeria to monitor the compliance of all banks in Nigeria to the IFRS adoption.

scholarly journals CEO Compensation in the U.S.: Are CEOs Underpaid or Overpaid ?

2018 ◽  
Vol 7 (3) ◽  
pp. 78
Author(s):  
Phillip James ◽  
Il-woon Kim
Keyword(s):  
Firm Performance ◽  
Financial Crisis ◽  
Regression Models ◽  
Ceo Compensation ◽  
Accounting Performance ◽  
Time Period ◽  
Multiple Regression Models ◽  
Before And After ◽  
The Usa ◽  
Compensation Packages

This study investigates the adequacy of CEO compensation from the perspective of using accounting measures to assess the performance of CEOs. The main objective of this research is to determine to what extent compensation packages received by American CEOs represent an underpayment of CEOs based on the performance of their firms when firm performance is defined in terms of accounting measures. CEO compensation data are obtained from Compustat, 10K SEC filings, and Forbes listing of CEO data.  The analysis covers a two-phased time period i.e., before and after the financial crisis in the USA. CEO compensation data are analyzed for the years 2004, 2005, 2006, and 2007 (pre-financial crisis) and for years 2009 to 2013 (post financial crisis). Multiple regression models consisting of six accounting performance measures are used to perform the analysis to determine the extent of CEO underpayment or overpayment. Having examined 1151 CEO compensation packages to determine if CEO underpayment exist in light of what is an overwhelming literature supporting CEO overpayment, the results show that 67.33% of the CEOs were in fact underpaid based on their firms performance, and only 32.67% (376 CEOs) were overpaid based on firm performance.

CEO pay sensitivities in innovative firms

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Raghavan J. Iyengar ◽  
Malavika Sundararajan
Keyword(s):  
Firm Performance ◽  
Performance Measures ◽  
Ceo Compensation ◽  
Critical Role ◽  
Positive Association ◽  
Executive Pay ◽  
Content Type ◽  
Accounting Performance ◽  
Innovative Firms ◽  
Compensation Committees

PurposeThis study aims to investigate whether compensation committees provide the chief executive officers (CEOs) with incentives to undertake “income-decreasing” but potentially “value-enhancing” innovation expenditures. The authors specifically analyze pay–performance relationships for innovative firms relative to all other firms. This study is critical because innovation is expensive and has uncertain outcomes.Design/methodology/approachUsing alternative accounting performance measures and market performance measures, the authors estimate an econometric model of CEO compensation in innovative firms that incorporates the interaction of endogenous innovation and firm performance.FindingsThe authors document an incremental positive association between changes in accounting performance measures and CEO compensation changes in innovative firms relative to other firms. This sensitivity of executive pay to firm performance is higher for firms that innovate. These results support the hypothesis that compensation committees provide incentives to carry out risky innovation by tying executive compensation more closely to firm performance. This finding survives a battery of sensitivity tests.Practical implicationsThe implications of this study are significant. Capital needs to support risky research and development investments (Tidd and Besant, 2018; Baldwin and Johnson, 1995) form the basis of innovative firms' operations. Considering these expenses, if CEOs, who play a critical role in the scanning, adapting and implementing innovative needs in a firm, are not protected and compensated for making risky choices, the entire investment itself will be threatened. Hence, the findings reiterate and support earlier findings that speak to the importance of compensating CEOs to make high-risk investments that will lead to long-term economic and financial gains for the firm when the innovative behaviors result in competitive market shares and profits.Originality/valueThe original work is related to the investigation of pay–performance sensitivity in the presence of innovation, which has not been fully investigated in prior literature.

Debt Structure Adjustments and Long-Run Stock Price Performance

2000 ◽  
Vol 9 (4) ◽  
pp. 427-453 ◽  
Author(s):  
Sudip Datta ◽  
Mai Iskandar-Datta ◽  
Kartik Raman
Keyword(s):  
Stock Price ◽  
Debt Structure ◽  
Price Performance ◽  
Long Run
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