Are Relative Performance Measures in CEO Incentive Contracts Used for Risk Reduction And/or Strategic Interaction
| Author | : Dimitris Vrettos |
| Publisher | : |
| Total Pages | : 113 |
| Release | : 2011 |
| Genre | : Accounting |
| ISBN | : 9781124598079 |
Are Relative Performance Measures In Ceo Incentive Contracts Used For Risk Reduction And Or Strategic Interaction
Download Are Relative Performance Measures In Ceo Incentive Contracts Used For Risk Reduction And Or Strategic Interaction full books in PDF, epub, and Kindle. Read online free Are Relative Performance Measures In Ceo Incentive Contracts Used For Risk Reduction And Or Strategic Interaction ebook anywhere anytime directly on your device. Fast Download speed and no annoying ads. We cannot guarantee that every ebooks is available!
Contract Theory: Discrete- and Continuous-Time Models
| Author | : Jaeyoung Sung |
| Publisher | : Springer Nature |
| Total Pages | : 348 |
| Release | : 2024-01-10 |
| Genre | : Business & Economics |
| ISBN | : 9819954878 |
This book provides a self-contained introduction to discrete-time and continuous-time models in contracting theory to advanced undergraduate and graduate students in economics and finance and researchers focusing on closed-form solutions and their economic implications. Discrete-time models are introduced to highlight important elements in both economics and mathematics of contracting problems and to serve as a bridge for continuous-time models and their applications. The book serves as a bridge between the currently two almost separate strands of textbooks on discrete- and continuous-time contracting models This book is written in a manner that makes complex mathematical concepts more accessible to economists. However, it would also be an invaluable tool for applied mathematicians who are looking to learn about possible economic applications of various control methods.
Executive Compensation: Empirical Essays on the Antecedents and the Consequences, and the Role of Executive Personality
| Author | : Steffen Florian Burkert |
| Publisher | : BoD – Books on Demand |
| Total Pages | : 233 |
| Release | : 2023-03-10 |
| Genre | : Business & Economics |
| ISBN | : 3947095104 |
Top managers have a significant impact on organizations because they are responsible for the formulation and implementation of corporate strategies, have the visibility and influence to shape the opinions of internal and external stakeholders, and coin the culture of their organizations, affecting employees at every level of the organization. Research has focused on the drivers and consequences of top managers' actions, with a particular focus on executive compensation, but important questions remain unanswered. This dissertation contributes to the literature on top executives by examining the antecedents of executive compensation, the influence of executive compensation on executive behavior, and the interplay of executive compensation and top executive personality. The first study introduces the role of compensation benchmarking for determining executive compensation to the management literature. It finds that benchmarking leads to compensation convergence. The second study examines the impact of executive compensation complexity on firm performance. The results show that compensation complexity is negatively related to accounting-based, market-based, and ESG-based metric of firm performance. The third study explores the implications of relative performance evaluation (RPE) on the imitation behavior of firms. It finds that the introduction of RPE is positively related to the imitation of the strategic actions of peer firms. The fourth study contributes to the growing literature on the impact of corporate social performance (CSP) goals in CEO contracts. Specifically, it examines how and when CSP incentives influence the CEO's attention to corporate social responsibility topics. The final essay examines the role of CEO personality; it finds that differences in CEO personality explain differences in the level of strategic conformity. Taken together, the essays in this dissertation make a significant contribution to the scholarly discourse on the influence of top managers on their companies. The empirical evidence presented expands the current understanding of how top executives affect strategic firm behaviors, and it provides insights for policymakers, managers, and investors.
Handbook Of Financial Econometrics, Mathematics, Statistics, And Machine Learning (In 4 Volumes)
| Author | : Cheng Few Lee |
| Publisher | : World Scientific |
| Total Pages | : 5053 |
| Release | : 2020-07-30 |
| Genre | : Business & Economics |
| ISBN | : 9811202400 |
This four-volume handbook covers important concepts and tools used in the fields of financial econometrics, mathematics, statistics, and machine learning. Econometric methods have been applied in asset pricing, corporate finance, international finance, options and futures, risk management, and in stress testing for financial institutions. This handbook discusses a variety of econometric methods, including single equation multiple regression, simultaneous equation regression, and panel data analysis, among others. It also covers statistical distributions, such as the binomial and log normal distributions, in light of their applications to portfolio theory and asset management in addition to their use in research regarding options and futures contracts.In both theory and methodology, we need to rely upon mathematics, which includes linear algebra, geometry, differential equations, Stochastic differential equation (Ito calculus), optimization, constrained optimization, and others. These forms of mathematics have been used to derive capital market line, security market line (capital asset pricing model), option pricing model, portfolio analysis, and others.In recent times, an increased importance has been given to computer technology in financial research. Different computer languages and programming techniques are important tools for empirical research in finance. Hence, simulation, machine learning, big data, and financial payments are explored in this handbook.Led by Distinguished Professor Cheng Few Lee from Rutgers University, this multi-volume work integrates theoretical, methodological, and practical issues based on his years of academic and industry experience.
Executive Compensation, Strategic Competition, and Relative Performance Evaluation
| Author | : Raj Aggarwal |
| Publisher | : |
| Total Pages | : 90 |
| Release | : 1996 |
| Genre | : Executives |
| ISBN | : |
We argue that strategic interactions between firms in an oligopoly can explain the puzzling lack of high-powered incentives in executive compensation contracts written by shareholders whose objective is to maximize the value of their shares. We derive the optimal compensation contracts for managers and demonstrate that the use of high-powered incentives will be limited by the need to soften product market competition. In particular, when managers can be compensated based on their own and their rivals' performance, we show that there will be an inverse relationship between the magnitude of high-powered incentives and the degree of competition in the industry. More competitive industries are characterized by weaker pay-performance incentives. Empirically, we find strong evidence of this inverse relationship in the compensation of executives in the United States. Our econometric results are not consistent with alternative theories of the effect of competition on executive compensation. We conclude that strategic considerations can preclude the use of high-powered incentives, in contrast to the predictions of the standard principal-agent model.
CEO Risk-Taking Incentives and Relative Performance Evaluation
| Author | : Dirk E. Black |
| Publisher | : |
| Total Pages | : 37 |
| Release | : 2018 |
| Genre | : |
| ISBN | : |
This paper examines how changes in CEO risk-taking incentives are associated with changes in the use of relative performance evaluation (RPE) in CEO contracts. Using a shock to the accounting for executive stock options (FAS 123R), I confirm that risk-taking incentives and option grants declined following FAS 123R using a within-firm design, but not a within-CEO-firm design. Decreased risk-taking incentives lead executives to invest in projects with lower systematic risk and can result in reduced incentives to hedge exposure to systematic risk in CEO compensation contracts via RPE. However, CEO relative risk-aversion increases with decreases in risk-taking incentives, potentially increasing incentives to protect CEO wealth from systematic performance via RPE. Testing these competing predictions, I find modest evidence consistent with reduced RPE surrounding FAS 123R, suggesting that when CEO risk-taking incentives are reduced, so are incentives to shield CEO pay from systematic performance.
The Moderating Effect of Relative Performance Evaluation on the Risk Incentive Properties of Executives' Equity Portfolios
| Author | : Hyungshin Park |
| Publisher | : |
| Total Pages | : 79 |
| Release | : 2015 |
| Genre | : |
| ISBN | : |
We offer evidence that the use of Relative Performance Evaluation (RPE) in CEOs' incentive contracts influences the effect of risk-taking incentives on both the magnitude and composition of firm risk. We find that when the incentive design lacks RPE features, the incentive portfolio vega motivates CEOs to increase total risk through the systematic component because it can be hedged. In contrast, when the incentive design includes RPE features, CEOs prefer idiosyncratic risk because RPE filters out the systematic component of firm performance. We also document that the use of RPE reinforces the incentive portfolio vega's effect on the total risk.
Executive Compensation, Strategic Competition, and Relative Performance Evaluation
| Author | : Rajesh K. Aggarwal |
| Publisher | : |
| Total Pages | : |
| Release | : 1998 |
| Genre | : |
| ISBN | : |
This paper examines optimal compensation contracts for managers of firms in imperfectly competitive markets. Previous studies have not found convincing evidence of high-powered incentives and relative performance evlauation. We show that strategic interactions among firms can explain this lack of strong performance-based incentives. When managers can be compensated based on their own and their rivals' performance, the need to soften product market competition generates an optimal compensation contract that places a positive weight on both own and rival performance. Across industries, the theory also predicts that firms in more competitive industries place greater weight on rival firm performance relative to own firm performance. We test the predictions empirically using recent data on compensation of executives at large corporations. We find evidence of a positive sensitivity of compensation to rival firm performance which is increasing in the degree of competition in the firm's industry.
Price vs. Non-Price Performance Measures in Optimal CEO Compensation Contracts
| Author | : John E. Core |
| Publisher | : |
| Total Pages | : 44 |
| Release | : 2011 |
| Genre | : |
| ISBN | : |
We empirically examine standard agency predictions about how performance measures are optimally weighted to provide CEO incentives. Consistent with prior empirical research, we document that the relative weight on price and non-price performance measures in CEO cash pay is a decreasing function of the relative variances. Agency theory speaks to the weights in total compensation (annual total pay and changes in the CEO's equity portfolio value), however, and we document that very little of CEOs' total incentives comes from cash pay. We also document that variation in the relative weight on price and non-price performance measures in CEO total compensation is an increasing function of the relative variances. The conflicting results using total compensation indicate that existing findings on cash pay cannot be interpreted as evidence supporting standard agency predictions. Based on our results, we suggest approaches for future research on performance measure use in CEO total compensation.
A Principled Approach to CEO Compensation and Contracts
| Author | : Michael Dennis Graham |
| Publisher | : Lulu.com |
| Total Pages | : 354 |
| Release | : 2019-01-09 |
| Genre | : Business & Economics |
| ISBN | : 1300799668 |
In this book we make the case for the genesis of the problem being that many CEOs are not operating under a ?fair and reasonable value exchange? with the organization that they work for, and that there are very clear reasons why that is the case. We know you will gain insight from this book finding new ways to view, consider, and reframe your approach to CEO (and other executive) employment relationships consisting of compensation programs and contracts using the all-important concept of value exchange. This book reveals a Principled Approached developed by consultants of Grahall, LLC, guiding the reader through the use of appropriate tools and well thought out processes, for a uniquely effective result.
