Download or read book Stock Related Compensation and Product Market Competition written by Giancarlo Spagnolo and published by . This book was released on 2003 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper shows that as long as agents in financial markets have rational expectations and firms pay out dividends, most common stock-based managerial compensation plans greatly facilitate tacit collusion in long-run (repeated) oligopolies. They may make the joint monopoly agreement supportable at any level of the discount factor. Stock-based incentives link managers' present compensation to the stock market's expectations about firms' future profitability. When a breach of a tacit collusive agreement occurs, a stock market with rational expectations anticipates the negative effect of the breach on firms' future profitability due to the forthcoming market war, and immediately discounts it on the stock price. Because this effect occurs in the same period in which a manager deviates, incentives linked to stock price directly reduce managers' gains from breaking any collusive agreement. When stock-based incentives are deferred, the pro-collusive effect is reinforced since the already limited beneficial effect on the stock price of short-run profits from a unilateral breach of a collusive agreement may be completely gone at the time when the manager receives the bonus.

Download or read book Product Market Competition and Top Management Compensation written by Simi Kedia and published by . This book was released on 1998 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines the effect of competition in the product markets on the design of a firm's governance structure. In oligopolies, profits are not just a function of a firm's own actions but also of the actions taken by rivals. Firms therefore behave strategically and commit to actions which elicit the most favorable responses from rivals. It is shown both theoretically and empirically that firms strategically use incentive features of compensation contracts toalter behavior in product markets. When a firm's output market decisions are strategic substitutes (i.e., marginal profits decrease with an increase in the rival's actions) managerial incentives are decreased, while if these decisions are strategic complements (i.e., marginal profits increase with an increase in the rival's actions) managerial incentives are increased. I develop an empirical measure which captures the sensitivity of a firm's marginal profits to changes in its rival's actions. An examination of CEO incentives in the data shows that when decisions are strategic substitutes, CEOs get awarded stock options with lower pay-for-performance incentives, own a smaller percentage of the firm and have a smaller threat of dismissal following bad performance of the firm. On the other hand, when decisions are strategic complements CEOs get higher pay-for-performance incentives from both cash and stock based compensation.

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 Compensation Structure and Product Market Competition written by John M. Abowd and published by . This book was released on 1996 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: The inability to measure the opportunity cost of labor has plagued analyses of firm-level compensation policies for many years. Using a newly constructed data set of French workers and firms, we estimate the opportunity cost of the employees' time based on a measure of the person-effect in the wage equations (derived from Abowd, Kramarz and Margolis 1994). We then make direct calculations of the quasi-rent per worker at each firm and the conditions within that firm's product market, as measured by international prices, using a representative sample of private French firms. We find that quasi- rents per worker are only mildly related to the structure of the French product market. The systematic variation in our quasi-rents is related to international market prices and work force structure, however, producing an estimate of bargaining power for the employees of about 0.4. This estimate, while slightly larger than other estimates, may be quite reasonable for the workers in an economy in which the vast majority of jobs are covered by industry-level collective bargaining agreements.

Download or read book What is the Effect of Product Market Competition on Chief Executive Compensation written by Erica B. Graboyes and published by . This book was released on 2010 with total page 114 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines the relationship between the degree of product market competition and the level of executive compensation for the largest 216 publically traded companies in U.S. manufacturing. Using 2005 CapitalIQ and Census data this paper finds that firm size has a substantial positive effect on the CEO's total and annual cash compensation. These results also indicate that holding firm size as well as other measures constant, the degree of industry competition these firms face plays a small, but interesting role. Consistent with the hypothesis based on the literature, industry concentration has a parabolic relationship with compensation such that boards offer the lowest compensation in oligopolistic markets. This result may be due to an increased ability of boards and shareholders to monitor CEOs at intermediate levels of competition.

Download or read book The Effect of Product market Competition on Managerial Incentives and Managerial Pay in Compensation Contracts written by Christo Suresh Karunananthan and published by . This book was released on 2004 with total page 168 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Compensation Strucutre and Product Market Competition written by John M. Abowd and published by . This book was released on 1996 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book An Analysis of CEO Equity Compensation in an Incomplete Contracting Framework written by Matthias Kiefer and published by Matthias Kiefer. This book was released on 2015-01-01 with total page 262 pages. Available in PDF, EPUB and Kindle. Book excerpt: I investigate whether equity grants increase the costs of CEO dismissal or departure (Oyer, 2004; Almazan and Suarez, 2003). I argue that costs of dismissal are increased because equity grants become exercisable upon forced departure. Equity grants can increase the costs of leaving because voluntarily departing CEOs forfeit equity compensation upon departure. I follow Rajgopal, Shevlin and Zamora (2006) in linking CEO equity compensation to a measure of labor market competition in a sample of S&P1500 companies from 1996 to 2010. I find that the intensity of labor market competition measured by a Herfindahl-Hirschman Index across industries and states affects equity grants and that the correlation is reversed in the penultimate year of forced CEO departure. This is consistent with the view that CEOs are concerned about being replaced in competitive labor markets and therefore demand more compensation that converts into severance pay. Conversely, when a dismissal is anticipated, I argue that CEOs are concerned about finding new employment and are then insured against a lack of outside opportunities. In addition, I conduct an empirical investigation of the relationship between stock options, restricted stock grants and other long-term compensation between 2001 and 2006. I argue that the Sarbanes-Oxley Act did not increase managerial accountability (see for example Cohen, Dey and Lys, 2005) and that new accounting rules did not increase accounting costs of stock options (see for example Hayes, Lemmon and Qiu, 2012). Instead, I suggest that the effective prohibition of executive loans from firms and brokers made it prohibitively costly for CEOs to exercise stock options. I find that stock options began to be replaced with other long-term compensation as early as 2004. CEOs began to accumulate vested but unexercised stock options. I do not find evidence that CEOs sold vested stock to raise funds.In the final empirical chapter, I consider whether a Herfindahl-Hirschman Index across industries and states can be interpreted as a proxy for labor market competition. Aggarwal and Samwick (1999) argue that it is product market competition that affects CEO equity grants. My results are consistent with Rajgopal, Shevlin and Zamora (2006) who do not find evidence that product market competition has any significant impact on equity grants. Instead, I find that labor market competition retains a significant and positive impact in our tests, and notably holds for the largest single product market. The principal limitations of the project were found to be the difficulty of collecting data of intended turnover and classifying it into forced and voluntary turnover. With respect to loans to executives, loans by brokers are usually not disclosed. This study is the first to analyze equity compensation as severance arrangement. CEO cash constraints in exercising options is an unexplored explanation for their disappearance.

Download or read book Executive Compensation and Product Market Competition written by and published by . This book was released on 2004 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book The Modern Corporation and Private Property written by Adolf Augustus Berle and published by . This book was released on 1937 with total page 396 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book The Future of Europe written by Alberto Alesina and published by MIT Press. This book was released on 2008-09-26 with total page 197 pages. Available in PDF, EPUB and Kindle. Book excerpt: A provocative argument that unless Europe takes serious action soon, its economic and political decline is unavoidable, and a clear statement of the steps Europe must take before it's too late. Unless Europe takes action soon, its further economic and political decline is almost inevitable, economists Alberto Alesina and Francesco Giavazzi write in this provocative book. Without comprehensive reform, continental Western Europe's overprotected, overregulated economies will continue to slow—and its political influence will become negligible. This doesn't mean that Italy, Germany, France, and other now-prosperous countries will become poor; their standard of living will remain comfortable. But they will become largely irrelevant on the world scene. In The Future of Europe, Alesina and Giavazzi (themselves Europeans) outline the steps that Europe must take to prevent its economic and political eclipse. Europe, the authors say, has much to learn from the market liberalism of America. Europeans work less and vacation more than Americans; they value job stability and security above all. Americans, Alesina and Giavazzi argue, work harder and longer and are more willing to endure the ups and downs of a market economy. Europeans prize their welfare states; Americans abhor government spending. America is a melting pot; European countries—witness the November 2005 unrest in France—have trouble absorbing their immigrant populations. If Europe is to arrest its decline, Alesina and Giavazzi warn, it needs to adopt something closer to the American free-market model for dealing with these issues. Alesina and Giavazzi's prescriptions for how Europe should handle worker productivity, labor market regulation, globalization, support for higher education and technology research, fiscal policy, and its multiethnic societies are sure to stir controversy, as will their eye-opening view of the European Union and the euro. But their wake-up call will ring loud and clear for anyone concerned about the future of Europe and the global economy.

Download or read book Are Stock Options the Managers Blessing Stock Option Compensation and Institutional Controls written by Matthias Benz and published by . This book was released on 2004 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: Stock option grants to top managers have largely contributed to the dramatic increase in US executive pay in recent years. In this paper it is argued that stock options, compared to other forms of compensation, have created strong incentives for managers to engage in lobbying activities for higher compensation. The empirical results presented for the Samp;P 500 firms and the years from 1992 to 1997 show that the relative success of such skimming activities is shaped by institutional controls. Stock option grants are substantially lower when control by the board of directors and the shareholders is higher, and competition on the product market of a firm is stronger.

Download or read book Shareholder Value Maximization and Product Market Competition Classic Reprint written by Julio Rotemberg and published by Forgotten Books. This book was released on 2018-02-27 with total page 54 pages. Available in PDF, EPUB and Kindle. Book excerpt: Excerpt from Shareholder Value Maximization and Product Market Competition Instead, managers learn along with the market about their types. Nevertheless, managerstry to manipulate the market's assessments through unobservable actions. Similarly, in our model, firms are not privately informed about their inherent profitability, but try to influence the market's assessments through their unobservable product-market strategies. About the Publisher Forgotten Books publishes hundreds of thousands of rare and classic books. Find more at www.forgottenbooks.com This book is a reproduction of an important historical work. Forgotten Books uses state-of-the-art technology to digitally reconstruct the work, preserving the original format whilst repairing imperfections present in the aged copy. In rare cases, an imperfection in the original, such as a blemish or missing page, may be replicated in our edition. We do, however, repair the vast majority of imperfections successfully; any imperfections that remain are intentionally left to preserve the state of such historical works.

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 Contract Theory written by Patrick Bolton and published by MIT Press. This book was released on 2004-12-10 with total page 746 pages. Available in PDF, EPUB and Kindle. Book excerpt: A comprehensive introduction to contract theory, emphasizing common themes and methodologies as well as applications in key areas. Despite the vast research literature on topics relating to contract theory, only a few of the field's core ideas are covered in microeconomics textbooks. This long-awaited book fills the need for a comprehensive textbook on contract theory suitable for use at the graduate and advanced undergraduate levels. It covers the areas of agency theory, information economics, and organization theory, highlighting common themes and methodologies and presenting the main ideas in an accessible way. It also presents many applications in all areas of economics, especially labor economics, industrial organization, and corporate finance. The book emphasizes applications rather than general theorems while providing self-contained, intuitive treatment of the simple models analyzed. In this way, it can also serve as a reference for researchers interested in building contract-theoretic models in applied contexts.The book covers all the major topics in contract theory taught in most graduate courses. It begins by discussing such basic ideas in incentive and information theory as screening, signaling, and moral hazard. Subsequent sections treat multilateral contracting with private information or hidden actions, covering auction theory, bilateral trade under private information, and the theory of the internal organization of firms; long-term contracts with private information or hidden actions; and incomplete contracts, the theory of ownership and control, and contracting with externalities. Each chapter ends with a guide to the relevant literature. Exercises appear in a separate chapter at the end of the book.

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 The Impact of Incomplete Contracts on Economics written by Philippe Aghion and published by Oxford University Press. This book was released on 2015-12-22 with total page 224 pages. Available in PDF, EPUB and Kindle. Book excerpt: The 1986 article by Sanford J. Grossman and Oliver D. Hart titled "A Theory of Vertical and Lateral Integration" has provided a framework for understanding how firm boundaries are defined and how they affect economic performance. The property rights approach has provided a formal way to introduce incomplete contracting ideas into economic modeling. The Impact of Incomplete Contracts on Economics collects papers and opinion pieces on the impact that this property right approach to the firm has had on the economics profession.