Download or read book Dividends Executive Compensation and Agency Costs written by Nalinaksha Bhattacharyya and published by . This book was released on 2009 with total page 16 pages. Available in PDF, EPUB and Kindle. Book excerpt: While researchers have found that dividend payout ratios are negatively related to executive compensation in North America, a relevant question remains as to whether such relationships hold in other institutional environments. Evidence from this study suggests that, as in North America, there is a negative relationship between dividend payout ratios and executive compensations in Germany. This study shows, that the role of dividends in resolving agency issues, is relevant not only in market based systems like that in North America but also in bank based systems like Germany. Agency issues also appear to be partially mitigated by the influence of banks. Bank influence is also found to be positively related to dividend payout ratio and thus consistent with the Free Cash Flow Hypothesis of Jensen (1986) and Easterbrook (1984).
Download or read book Agency Cost Problems in Executive Compensation written by Ufuoma Barbara Akpotaire and published by . This book was released on 2011 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Some authors argue that the integration of stock options as well as restricted stocks into executive compensation may reduce the conflicts between shareholders and management but may at the same time give rise to other agency problems connected to debt. While this line of argument may hold some merit, the structure of executive compensation packages, has over the years, focused less on stock options and more on restricted stocks. A classic example of this trend is Microsoft, who in 2003, switched from using stock options to restricted stock. Compensating executives through restricted stocks has recently come under scrutiny due to the fact that some of these executives receive dividend equivalents on restricted stocks even before the vesting period. One recent example of a company that has received such criticism is CA. Inc. CA's executives received as much as $19,530 apiece on dividend equivalents from stock that they do not own. The relevant question that follows is whether executives are extracting additional compensation from shareholders using dividend equivalents or are dividend equivalents appropriate incentives to executives. This paper will examine the concept of restricted stocks as part of executive compensation and the motivation of companies in using this compensation policy to address the agency costs problem. I will also examine practical examples of CEO's who have received dividend equivalent payments on restricted stocks, variations of corporate treatment of dividend equivalent rights and the motivation of some companies who chose to defer payment on dividend equivalents until an executive earns the shares. This paper will further examine, whether there are agency cost benefits of dividend equivalent rights, which merit a strong case for its use. I conclude that there are a quite a number of significant agency cost benefits of dividend equivalent rights, one of which includes the fact that it helps executives focus on, and rewards them for managing the business to produce cash that is capable of being distributed to shareholders in the form of a dividend. I will also look at some of the criticisms that have been asserted by shareholder activist groups as to how dividend equivalent rights reduce firm value, increase agency costs, and fails to achieve the objectives of adopting restricted stocks as a performance enhancing compensation package. I will describe the criticisms with a view to determining the basis of the criticisms and I conclude that while the criticisms are well founded, calling for complete elimination of dividend equivalent rights is not an appropriate solution to the agency cost problem. Finally, I will put forward my recommendations for policy reforms.
Download or read book Essays on Agency Costs Dividend Policy and Corporate Ownership Structure written by Ravi Jain and published by . This book was released on 1999 with total page 318 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book An Introduction to Executive Compensation written by Steven Balsam and published by Academic Press. This book was released on 2002 with total page 410 pages. Available in PDF, EPUB and Kindle. Book excerpt: General readers have no idea why people should care about what executives are paid and why they are paid the way they are. That's the reason that The Wall Street Journal, Fortune, Forbes, and other popular and practitioner publications have regular coverage on them. This book not only proposes a reason - executives need incentives in order to maximize firm value (economists call this agency theory) - it also describes the nature and design of executive compensation practices. Those incentives can take the form of benefits (salary, stock options), or prerquisites (reflecting the status of the executive within the organizational culture.
Download or read book Pay Without Performance written by Lucian A. Bebchuk and published by Harvard University Press. This book was released on 2004 with total page 308 pages. Available in PDF, EPUB and Kindle. Book excerpt: The company is under-performing, its share price is trailing, and the CEO gets...a multi-million-dollar raise. This story is familiar, for good reason: as this book clearly demonstrates, structural flaws in corporate governance have produced widespread distortions in executive pay. Pay without Performance presents a disconcerting portrait of managers' influence over their own pay--and of a governance system that must fundamentally change if firms are to be managed in the interest of shareholders. Lucian Bebchuk and Jesse Fried demonstrate that corporate boards have persistently failed to negotiate at arm's length with the executives they are meant to oversee. They give a richly detailed account of how pay practices--from option plans to retirement benefits--have decoupled compensation from performance and have camouflaged both the amount and performance-insensitivity of pay. Executives' unwonted influence over their compensation has hurt shareholders by increasing pay levels and, even more importantly, by leading to practices that dilute and distort managers' incentives. This book identifies basic problems with our current reliance on boards as guardians of shareholder interests. And the solution, the authors argue, is not merely to make these boards more independent of executives as recent reforms attempt to do. Rather, boards should also be made more dependent on shareholders by eliminating the arrangements that entrench directors and insulate them from their shareholders. A powerful critique of executive compensation and corporate governance, Pay without Performance points the way to restoring corporate integrity and improving corporate performance.
Download or read book Corporate Payout Policy written by Harry DeAngelo and published by Now Publishers Inc. This book was released on 2009 with total page 215 pages. Available in PDF, EPUB and Kindle. Book excerpt: Corporate Payout Policy synthesizes the academic research on payout policy and explains "how much, when, and how". That is (i) the overall value of payouts over the life of the enterprise, (ii) the time profile of a firm's payouts across periods, and (iii) the form of those payouts. The authors conclude that today's theory does a good job of explaining the general features of corporate payout policies, but some important gaps remain. So while our emphasis is to clarify "what we know" about payout policy, the authors also identify a number of interesting unresolved questions for future research. Corporate Payout Policy discusses potential influences on corporate payout policy including managerial use of payouts to signal future earnings to outside investors, individuals' behavioral biases that lead to sentiment-based demands for distributions, the desire of large block stockholders to maintain corporate control, and personal tax incentives to defer payouts. The authors highlight four important "carry-away" points: the literature's focus on whether repurchases will (or should) drive out dividends is misplaced because it implicitly assumes that a single payout vehicle is optimal; extant empirical evidence is strongly incompatible with the notion that the primary purpose of dividends is to signal managers' views of future earnings to outside investors; over-confidence on the part of managers is potentially a first-order determinant of payout policy because it induces them to over-retain resources to invest in dubious projects and so behavioral biases may, in fact, turn out to be more important than agency costs in explaining why investors pressure firms to accelerate payouts; the influence of controlling stockholders on payout policy --- particularly in non-U.S. firms, where controlling stockholders are common --- is a promising area for future research. Corporate Payout Policy is required reading for both researchers and practitioners interested in understanding this central topic in corporate finance and governance.
Download or read book The Handbook of the Economics of Corporate Governance written by Benjamin Hermalin and published by Elsevier. This book was released on 2017-09-18 with total page 762 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Handbook of the Economics of Corporate Governance, Volume One, covers all issues important to economists. It is organized around fundamental principles, whereas multidisciplinary books on corporate governance often concentrate on specific topics. Specific topics include Relevant Theory and Methods, Organizational Economic Models as They Pertain to Governance, Managerial Career Concerns, Assessment & Monitoring, and Signal Jamming, The Institutions and Practice of Governance, The Law and Economics of Governance, Takeovers, Buyouts, and the Market for Control, Executive Compensation, Dominant Shareholders, and more. Providing excellent overviews and summaries of extant research, this book presents advanced students in graduate programs with details and perspectives that other books overlook. - Concentrates on underlying principles that change little, even as the empirical literature moves on - Helps readers see corporate governance systems as interrelated or even intertwined external (country-level) and internal (firm-level) forces - Reviews the methodological tools of the field (theory and empirical), the most relevant models, and the field's substantive findings, all of which help point the way forward
Download or read book Stealth Compensation written by Kristina Minnick and published by . This book was released on 2014 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt: Companies can increase executive compensation by allowing dividends to be paid on unvested restricted stocks grants, also known as stealth compensation. Examining all S&P 500 firms over the period 2003-2007, we find that more than half of the dividend paying firms allow this practice. We look at whether this form of compensation reduces agency costs or decreases value for shareholders. We find that CEOs' stealth compensation amounts to an average $180,000 in additional income, which increases the CEOs' cash compensation and total compensation by 9% and 2% respectively. Firms engaging in stealth compensation have higher dividend payout ratios than those not allowing stealth compensation. For all firms using stealth compensation, there is a reduction in average ROA and Tobin's Q over the long run. However, stealth compensation companies with potential agency issues see a meaningful improvement in their long run performance. For weakly governed companies, stealth compensation may act as a bonding mechanism which may serve to reduce agency costs and therefore increase shareholder value.
Download or read book The Control of Corporate Europe written by Fabrizio Barca and published by OUP Oxford. This book was released on 2001-11-15 with total page 354 pages. Available in PDF, EPUB and Kindle. Book excerpt: Written by an international team of authors, this book provides the first systematic account of the control of corporate Europe based on voting block data disclosed in accordance with the European Union's Large Holdings Directive (88/627/EEC). The study provides detailed information on the voting control of companies listed on the official markets in Austria, Belgium, France, Germany, Italy, the Netherlands, Spain, Sweden, the United Kingdom, and, as a benchmark comparison, the United States. The authors record a high concentration of control of corporations in many European countries with single blockholders frequently controlling more than fifty per cent of corporate votes. In contrast, a majority of UK listed companies have no blockholder owning more than ten per cent of shares, and a majority of US listed companies have no blockholder with more than six per cent of shares. Those chapters devoted to individual countries illustrate how blockholders can use legal devices to leverage their voting power over their cash-flow rights, or how incumbents prevent outsiders from gaining voting control. It is shown that the cultural and linguistic diversity of Europe is (almost) matched by its variety of corporate control arrangements.
Download or read book Dividend Policy and Corporate Governance written by Luis Correia da Silva and published by OUP Oxford. This book was released on 2004-02-26 with total page 204 pages. Available in PDF, EPUB and Kindle. Book excerpt: Dividends are not only a signal about a firm's prospects under asymmetric information, but they can also act as a corporate governance device to align the management's interests with those of the shareholders. Dividend Policy and Corporate Governance is the first comprehensive volume on the relationship between dividend policy and corporate governance, and examines in detail empirical studies and current theories. Reviewing the interactions between dividend policy and other corporate governance mechanisms, it compares results for the UK and the US with those for other countries such as France, Germany, and Japan, and provides new empirical evidence on corporate governance in continental Europe and its impact on dividends. Focusing on one of the main representatives of this system, Germany, it highlights major differences between the dividend policies of German firms and those of UK or US firms. Conventional wisdom states that German dividends are lower than UK or US dividends, yet on a published-profits basis the exact converse is true. In addition, the authors demonstrate a link between corporate control structures and dividend payouts, report evidence that the existence of a loss is an additional determinant of dividend changes, and demonstrate that the tax status of the controlling shareholder and the firm's dividend payout are not linked. The conclusions reached in this book have important implications for the current debate on corporate governance, making it invaluable for academics, finance professionals, regulators, and legal advisors.
Download or read book Dividend Policy Agency Costs and Earned Equity written by Harry DeAngelo and published by . This book was released on 2004 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Concentrated Corporate Ownership written by Randall K. Morck and published by University of Chicago Press. This book was released on 2007-12-01 with total page 404 pages. Available in PDF, EPUB and Kindle. Book excerpt: Standard economic models assume that many small investors own firms. This is so in most large U.S. firms, but wealthy individuals or families generally hold controlling blocks in smaller U.S. firms and in all firms in most other countries. Given this, the lack of theoretical and empirical work on tightly held firms is surprising. What corporate governance problems arise in tightly held firms? How do these differ from corporate governance problems in widely held firms? How do control blocks arise and how are they maintained? How does concentrated ownership affect economic growth? How should we regulate tightly held firms? Drawing together leading scholars from law, economics, and finance, this volume examines the economic and legal issues of concentrated ownership and their impact on a shifting global economy.
Download or read book Capital Choices written by Michael E. Porter and published by . This book was released on 1994-12-01 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book A Shareholder Value and Agency Theory Based Compensation System written by Arne Wolter and published by GRIN Verlag. This book was released on 2002-01-24 with total page 92 pages. Available in PDF, EPUB and Kindle. Book excerpt: Diploma Thesis from the year 2000 in the subject Business economics - Banking, Stock Exchanges, Insurance, Accounting, grade: 1,0 (A), Technical University of Braunschweig (Department of Accounting/College of Business Administration), language: English, abstract: "The fundamental goal of all business is to maximize shareholder value." This statement has become commonplace not only in corporate America, but it is also the imperative statement of business around the world. A failure to seek to maximize shareholder value results in pressure from the board of directors and activist shareholders. The takeover movement of the latter half of the 1980s provided another powerful incentive for managers to focus on creating value. This is grounded on the fact that the only compelling takeover defense is to deliver superior shareholder value. Given the globalization of capital markets and their diminishing boundaries, economic systems will slowly run out of capital, if they are unable to create shareholder wealth and thereby attract investors. If economic systems are unable to provide superior or at least satisfying returns they will fall further and further behind in global competition and will lose employment opportunities. Thus, a value-based system grows in importance as capital becomes more mobile. Although shareholder value metrics and value-based management are widely known they are far from being universally applied. Years of restructuring and employee layoffs frequently attributed to shareholder value considerations coupled with self-interested management and shortsighted focus on current stock price has promoted frustration and uncertainty. Thus, it is critical to fully understand the shareholder value approach and its variants. Additionally, it is vital for the shareholder value approach that the objectives of the mangers and the company′s shareholders are aligned and focused on delivering superior shareholder value. The relationship between manager and stockholder can best be examined by the agency theory that studies the contract between agents (e.g. managers) and principals (e.g. stockholders).3 An overview of a holistic shareholder value and agency based compensation system is the topic of this paper.
Download or read book Executive Compensation and Shareholder Value written by Jennifer Carpenter and published by Springer Science & Business Media. This book was released on 2013-04-17 with total page 159 pages. Available in PDF, EPUB and Kindle. Book excerpt: Executive compensation has gained widespread public attention in recent years, with the pay of top U.S. executives reaching unprecedented levels compared either with past levels, with the remuneration of top executives in other countries, or with the wages and salaries of typical employees. The extraordinary levels of executive compensation have been achieved at a time when U.S. public companies have realized substantial gains in stock market value. Many have cited this as evidence that U.S. executive compensation works well, rewarding managers who make difficult decisions that lead to higher shareholder values, while others have argued that the overly generous salaries and benefits bear little relation to company performance. Recent conceptual and empirical research permits for the first time a truly rigorous debate on these and related issues, which is the subject of this volume.
Download or read book Framed The Failure of Traditional Agency Cost Explanations for Executive Pay Practices written by QC Tingle (Bryce) and published by . This book was released on 2017 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt: This is the second paper in a series exploring the empirical evidence arising from the increasing use of certain executive compensation best practices. The first paper, “How Good are our “Best Practices” When it Comes to Executive Compensation?,” summarizes research finding that these best practices are responsible for most of the growth in executive compensation and lead to sub-optimal corporate performance. It also suggests that the best practices currently in wide-spread use contradict practices that are often very helpful to directors in setting appropriate incentives in real world circumstances.This paper goes on to argue that failures in executive compensation are the result, not of over-powerful CEOs confronting supine boards, but of directors and management earnestly striving to follow bad “best practices” promulgated by the corporate governance industry. This can be seen in: (1) the pattern of cause and effect distinguishable in the history of changing North American and U.K. pay practices; (2) the link between these questionable pay practices and various measures of board independence/managerial weakness; and (3) the increasing use of these pay practices in circumstances of increased shareholder power.The most obvious solution is to increase board autonomy in setting pay. Regulatory steps for doing so lay close to hand and in some cases have been discussed for years.
Download or read book Repurchasing Common Stock written by Francis J. Walsh and published by . This book was released on 1975 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt:
