CEO Contractual Protection and Managerial Short-Termism.

CEO Contractual Protection and Managerial Short-Termism.

Authors:
Xia Chen1
Qiang Cheng1
Lo, Alvis K.2
Xin Wang3

Source:
Accounting Review. Sep2015, Vol. 90 Issue 5, p1871-1906. 36p. 9 Charts.

有合同保护的那些CEO，不太会有real earnings management的行为(比如砍掉R&D)之类。


How to address managerial short-termism is an important issue for companies, regulators, and researchers. We examine the effect of CEO contractual protection, in the form of employment agreements and severance pay agreements, on managerial short-termism. We find that firms with CEO contractual protection are less likely to cut R&D expenditures to avoid earnings decreases and are less likely to engage in real earnings management. The effect of CEO contractual protection is both statistically and economically significant. We further find that this effect increases with the duration and monetary strength of CEO contractual protection. The cross-sectional analyses indicate that the effect is stronger for firms in more homogeneous industries and for firms with higher transient institutional ownership, as protection is particularly important for CEOs in these firms, and is stronger when there are weaker alternative monitoring mechanisms.

Earnings Restatements, Changes in CEO Compensation, and Firm Performance

TAR(2008) Volume 83, Issue 5 (September 2008)

Qiang Cheng, David B. Farber

University of Wisconsin–Madison

University of Missouri

Restatement过后，CEO Compensation中的Option比重会下降，公司业绩会提高。

ABSTRACT: Prior research finds that earnings restatements are linked to CEOs’ excessive option-based compensation and equity holdings. In this paper, we investigate whether firms that experience earnings restatements recontract with their CEOs to reduce their option-based compensation and if so, whether this leads to improved firm performance. Based on 289 restatement firms over the period 1997–2001, we find that the proportion of CEOs’ compensation in the form of options declines significantly in the two years following the restatement. Furthermore, we document that this reduction is accompanied by a decrease in the riskiness of investments, as reflected in lower stock return volatility and subsequent improvements in operating performance. Our results suggest that a decrease in option-based compensation reduces CEOs’ incentives to take excessively risky investments, resulting in improved profitability. Overall, our findings provide insights into the design and efficacy of CEO compensation contracts.

Board leadership structure and CEO turnover

Board leadership structure and CEO turnover
Journal of Corporate Finance
Volume 8, Issue 1, January 2002, Pages 49–66


Vidhan K. Goyal, Chul W. Park

如果CEO和chairman是一个人，就很难被炒掉。

We study whether bestowing chief executive officer (CEO) and board chairman duties on one individual affects a boards decision to dismiss an ineffective CEO. The results show that the sensitivity of CEO turnover to firm performance is significantly lower when the CEO and chairman duties are vested in the same individual. These results are consistent with the view that the lack of independent leadership in firms that combine the CEO and Chairman positions makes it difficult for the board to remove poorly performing managers.

Determinants of CEO Pay:A Comparison of ExecuComp and Non-ExecuComp Firms.

Determinants of CEO Pay:A Comparison of ExecuComp and Non-ExecuComp Firms.
(TAR, 2010)

Cadman, Brian
Klasa, Sandy
Matsunaga, Steve

在不在Execucomp数据库的两种公司，是不同哒！

We document that firms included in the ExecuComp database tend to be larger, more complex, followed by more analysts, have greater stock liquidity levels, and have higher total, but less concentrated, institutional ownership than other firms. Based on these differences, we test and find support for three predictions. First, ExecuComp firms rely more heavily on earnings and stock returns in determining CEO cash compensation. Second, the weight on earnings is more sensitive to differences in the extent of growth opportunities for ExecuComp firms. Third, the positive relation between institutional ownership concentration and the value of stock option grants is stronger for ExecuComp firms. Overall, our results suggest that ExecuComp and non-ExecuComp firms operate in different contracting environments that lead to differences in the design of their executive compensation contracts. As a result, care should be taken in extending results based on ExecuComp samples to non-ExecuComp firms.