Charles University in Prague Faculty of Social Sciences Institute of Economic Studies Title Page MASTER'S THESIS Executive Compensation in Firms Producing Addictive Goods Author: Bc. Michael Janský Supervisor: Jiří Novák, M.Sc., Ph.D. Academic Year: 2014/2015 Abstract This thesis investigates executive compensation, turnover and migration patterns in firms that produce addictive goods (tobacco, alcohol, and gambling). Previous research has identified costs associated with the production of harmful goods specific to these industries. Consistent with this stream of research, I find increased executive compensation in tobacco, alcohol, and gambling firms. This finding seems to be driven by industry specific characteristics, rather than by executives' traits or by the 'traditional' determinants of executive compensation. Executive migration patterns and the effect of job change on compensation indicate that the higher compensation is not caused by executives' attributes well suited for these firms' specific needs, by executives' contribution to value-creating activities, or by other executive-specific characteristics. Rather, the higher compensation seems to reflect a payment to executives for having to bear society's aversion to or displeasure with these harmful goods, and those who produce them. JEL...

Thesis advisor: Ronnie Sadka / This dissertation is comprised of three essays which examine the ramifications of executive compensation incentive structures on corporate outcomes. In the first essay, I present evidence which suggests that executive compensation convexity, measured as the sensitivity of managerial equity compensation portfolios to stock volatility, predicts firm-specific crashes. I find that a bottom-to-top decile change in compensation convexity results in a 21% increase in a firm's unconditional ex-post idiosyncratic crash risk. In contrast, I do not find robust evidence of a symmetric relation between compensation convexity and a firm's idiosyncratic positive jump risk. Finally, I exploit exogenous variation in compensation convexity, arising from a change in the expensing treatment of executive stock options, in buttressing my interpretations within a natural experiment setting. My results suggest that managerial equity compensation portfolios do not augment a firm's future idiosyncratic crash risk because they link managerial wealth to equity prices, but rather because they tie managerial wealth to the volatility of a firm's equity. In the second essay, I exploit an exogenous negative shock to CEO compensation convexity in examining the differential ramifications of option pay and risk-taking incentives on the systematic and idiosyncratic volatility of the firm. I find new evidence that is largely consistent with the notion that compensation convexity, stemming from option convexity, predominantly incentivizes under-diversified risk-averse CEOs to increase the value of their option portfolios by increasing the systematic volatility of the firms they manage. I hypothesize that this effect manifests as systematic volatility is readily more hedgeable than idiosyncratic volatility from the perspective of risk-averse executives who are overexposed to the idiosyncratic risk of their firms. If managers use options as a conduit through which they can gamble with shareholder wealth by overexposing them to suboptimal systematic volatility, options are not serving their intended contracting function. Instead of decreasing agency costs of risk, by encouraging CEOs to adopt innovative positive NPV projects that may be primarily characterized by idiosyncratic risk, option pay may have contributed to the same frictions it was intended to reduce. In the third essay, I present evidence that is consistent with the notion that certain managerial debt-like remuneration structures decrease the likelihood of firm-specific positive stock-price jumps. Namely, I find that a bottom-to-top decile increase in the present value of CEO pension pay leads to a roughly 25\% decrease in a firm's unconditional ex-post jump probability. However, I do not find that CEO deferred compensation decreases firm jump risk. Finally, I find that information in option-implied volatility smirks does not appear to reflect these dynamics. Together, these results suggest that not all debt-like compensation mechanisms decrease managerial risk-taking equally. / Thesis (PhD) — Boston College, 2015. / Submitted to: Boston College. Carroll School of Management. / Discipline: Finance.

Made available in DSpace on 2015-03-05T19:14:41Z (GMT). No. of bitstreams: 0 Previous issue date: 24 / Nenhuma / O objetivo deste estudo foi verificar se as formas de remuneração dos executivos das Companhias Latino-Americanas influenciam o gerenciamento de resultados contábeis. Realizou-se uma análise empírica de 48 empresas, de 4 diferentes países latino-americanos em um período de 5 anos (entre 2002 e 2006), perfazendo um total de 240 observações. Para verificar a ocorrência de gerenciamento de resultados nas companhias latino-americanas, foi adotado o modelo Kang e Sivaramakrishnan (1995). Os testes estatísticos utilizados foram: U Mann-Whitney e Teste Wald. Os resultados do estudo indicaram indícios de maior nível de gerenciamento de resultados nas empresas que fornecem remuneração não fixa aos seus executivos. / The objective of this study was to determine whether the forms of compensation for executives of companies Latin American influence earnings management. There was an empirical analysis of 48 companies, of 4 different Latin American countries in a period of 5 years (between 2002 and 2006), which totaled of 240 observations. To check the occurrence of earnings management in Latin American companies, the model adopted was Kang and Sivaramakrishnan (1995). The statistical tests used to the validity of regressions were: Mann-Whitney U test and Wald. The findings the study showed signs of greater level of earnings management in companies that ofter variable pay to their executives.

While the de-politicization of public sector management was a core objective of past reform initiatives, more recent debates urge the state to act as a strong principal when it comes to public sector unity and policy coherence - and consequently make a case for reinvigorating links between the political and managerial sphere. Using data from Austrian public sector organizations, we test and confirm the causal relationship of political connectedness of board members and executive compensation. Differentiating between value-based and interest-based in-groups, we suggest that only value-based political connectedness has the potential to restore patronage as a control instrument and governance tool. Self-interested and reward-driven patronage, on the other hand, indicated by a strong association of political connectedness and executive pay, refers to the type of politicization that previous public sector reforms promised to abolish.

abstract: This dissertation explores the determinants of Chief Executive Officer (CEO) perquisites, i.e., nonmonetary compensation offered to particular employees and not essential to the accomplishment of a CEO’s duties. While the current CEO perquisite literature has focused on understanding the economic determinants of CEO perquisites, I study the social-psychological determinants of perquisites. Specifically, I propose that organizational status is positively associated with CEO perquisites. The status literature suggests that high-status organizations derive benefits from status and status signals, while agency theory proposes that perquisites are a way for CEOs to extract private rents. Therefore, I posit that for high-status organizations, the benefits derived from certain CEO perquisites may negate the costs associated with those perquisites. I examine a specific CEO perquisite: the mandatory use of corporate aircraft for personal travel. Prior research and the popular press suggest that this perquisite is often seen not only as a status signal but also as an agency cost. Accordingly, I hypothesize that higher status organizations and organizations with higher status directors are more likely than lower status organizations or organizations with lower status directors to mandate their CEOs to use corporate aircraft for personal travel. I also propose that the effect is stronger for low- or high-status organizations than for middle-status organizations. In addition, I hypothesize five contingencies moderating the above relationships. I examine hypothesized relationships using a sample of S&P 500 organizations, and I find support for many of my hypotheses. This dissertation contributes to both status and executive compensation literature. / Dissertation/Thesis / Doctoral Dissertation Business Administration 2019

In the nonprofit industry, lapses in internal controls and low levels of accountability have resulted in many organizations becoming insolvent. Grounded in the agency theory, the purpose of this correlational study was to examine the relationship between federal compliance requirement, executive compensation, nonprofit size, nonprofit type, and internal control infraction. Archival data were collected from 144 nonprofit organizations in the southeast United States. The results of the multiple regression analyses indicated the model was able to predict the relationship between federal compliance requirement, executive compensation, nonprofit size, nonprofit type, and internal control infraction, F(7, 136) = 6.559, p < .001, R2 = .252, with non-profit type (hospitals), (β = -9.392, t = 7.191, p <0.050), accounting for a higher contribution to the model than executive compensation, (β = -0.049, t = 1.96, p <0.050). Federal compliance requirement and nonprofit size did not explain any significant variation in internal control infraction. The implications for positive social change included the potential for a better understanding by nonprofit managers of the importance of internal controls, leading to the effective and efficient provision of goods and services needed by members of society.

In this work I investigate how executive social connections and executive gender diversity dually affect firm Corporate Social Responsibility (CSR), a set of firm policies implemented to benefit the social, economic, and environmental welfare of all stakeholders, and how the changes in CSR driven by executive social connections and executive gender diversity in turn affect a range of corporate policies. This research adds to the social networks, gender, and CSR literature within finance in multiple ways. First, while much past work examines the impact on corporate policy of executive gender or executive social connections in isolation, no major work to date examines the impact of gender dependent executive social connections on corporate policy. Second, this work definitively ties the dual effects of executive gender diversity and social connections to firm CSR. The dual impact of social connections and gender diversity on CSR is shown to affect major corporate policies. In all, this work provides evidence that CSR helps drive important firm polices, including M&A and executive compensation policy, and that CSR is impacted by both a firm’s executive gender diversity and social network connections. / Includes bibliography. / Dissertation (Ph.D.)--Florida Atlantic University, 2019. / FAU Electronic Theses and Dissertations Collection

Researchers have consistently shown that a firms repurchase announcement is met with positive abnormal stock price return reactions. Open-market repurchases are extremely flexible, non-committal and non-punitive; thus, it is puzzling that the mere announcement of an open-market repurchase will likely increase a firms stock price. I propose to disentangle a firms choice to repurchase its stock to determine when a repurchase announcement is good news for shareholders and when the announcement is not. I find that the purpose of the repurchase announcement matters. At the announcement date, managers intention of avoiding dilution is significantly negative and enhancing shareholder value is significantly positive, as expected. However, more interesting results are observed at two-years and three-years post announcement where I show that counteracting dilution is not a good reason to conduct a repurchase and, although not as strongly negative, enhancing shareholder value does not bear out its announcement promise. Furthermore, I find that firms that repurchase their shares to finance an acquisition are well compensated for their efforts, especially in the long run. I attribute their success to higher cash flows resulting from reducing their tax burden with their amortization deduction of the goodwill created from the purchase accounting acquisition.

<p>Prior studies argue that the board and management of a firm should maximize shareholder value. Also, there is evidence that compensation levels are linked to firm performance as well as monitoring, in other words, the composition of the board influence compensation.</p><p>We document no correlation between CEO compensation and firm performance for a sample of Swedish companies listed on the Stockholm Stock Exchange (SSE) over the sample period 1999 to 2008. However, the Industry firms might pay the CEO for performance. Also, stock ownership influence compensation levels; when the five largest shareholders increase their holdings, CEO compensation levels decrease. We interpret this finding as that monitoring is important and the agency costs can be reduced by higher holdings by institutional investors.</p>

In the first of the three chapters in this thesis, the effects of overlapping board directorships on executive compensation are analyzed. In particular the possibility of more or less explicit agreements to reciprocally increase compensation levels, or the possibility that the personal relationships of board members and CEOs determine compensation levels are examined, with suggestive results. The second chapter documents the existence of economically important halo effects in the Australian consumer real estate marker. The final chapter evaluates the effects of blackout (or silent) periods in the UK on corporate insider behavior. Joakim Bång's main research interests are in empirical corporate finance, and in particular in executive compensation, corporate governance and behavioral finance. He is currently teaching at the University of New South Wales in Sydney, Australia. / Diss. Stockholm : Handelshögskolan i Stockholm, 2011