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1 Abstract The equity-based incentives are considered to be one of the instruments helping to motivate executives. The use of this compensation framework should in theory tackle and mitigate the agency problems, and prevent the possible attempts of managers to pursue their own interest over the interests of shareholders. The literature focusing on the effects differs greatly. There is no conformity over the effect of equity compensation on company performance. This research study the effect of CEO-related equity incentives and stock ownership on company performance. The main finding is the positive effect of the equity incentives measured by the percentage of CEOs' equity- based compensation on company performance proxied by the change in Tobin's Q. The thesis does not find any significant effect of insiders' stock ownership. The dataset of 107 publicly traded US companies is used for the empirical analysis. The results are estimated based on a fixed effects model and pooled ordinary least squares. This thesis contributes to the ongoing debate over the effects. It also widens the narrow literature on the structure of compensation. JEL Classification M120 Keywords Equity-based, CEO, compensation structure, equity ownership, company performance Author's e-mail theo.sarec@gmail.com Supervisor's e-mail...

This thesis comprises five empirical essays using Swedish data. Three of the essays examine open market share repurchases, one essay investigates changes in investors’ shareholdings surrounding equity rights offerings (ROs), and the last essay investigates owner-managers’ equity portfolio choices. The first essay examines stock performance around initiation announcements of open market share repurchase programs, the price impact of repurchase trading and the long-run stock performance following the initiation announcements. The study uses a unique data set of initiation announcements and actual share repurchases conducted by firms listed on the Stockholm Stock Exchange (SSE). The results show that initiation announcements of open market repurchase programs exhibit a 2 day abnormal return (AR) of 2% on average. The price impact on the actual repurchase days is positively correlated with the daily repurchase volume, and is both statistically and economically significant during the first 3 repurchase days in a repurchase program. The long-run abnormal stock performance is positively associated with the fraction of shares bought in the program and is on average 7% for the first year following the initiation announcement. The results indicate that repurchase trading provides price support and that the market participants detect and perceive the initiation announcement and the first repurchase days in a repurchase program as a signal of undervaluation. The second essay examines differences in the market performance of Swedish firms that initiate repurchase programs infrequently (1-2 programs), occasionally (3-4 programs) and frequently (5 or more programs) over the period 2000-2009. It is found that infrequent repurchase programs are greeted with a stronger positive reaction than occasional and frequent programs. However, over the long-term, infrequent repurchase programs show no AR while occasional and frequent repurchase programs show significant positive ARs. A positive relationship between AR and repurchase size is documented for all types of repurchase programs. The third essay examines the market liquidity impact of open market share repurchases in an electronic order-driven market. The study uses a detailed data set of daily repurchase transactions on the SSE together with intraday data on bid-ask spreads and order depths which enables an investigation of the liquidity effects on the actual repurchase days. It is found that repurchase trades inside the order-driven trading system contribute to market liquidity through narrower bid-ask spreads and deeper market depths. After controlling for trading volume, price and volatility, a significant decrease of the bid-ask spread on repurchase days relative to surrounding non-repurchase days is still found. However, repurchases executed as block trades outside the order-driven trading system have a detrimental effect on the bid-ask spread, consistent with a negative response to the presence of informed managerial trading. The fourth essay examines changes in equity ownership surrounding ROs by firms listed on the SSE. The results show that domestic individual investors on average reduce their shareholdings following rights issues, whereas domestic institutional investors and foreign investors increase their holdings. However, when ownership changes are adjusted with changes in ownership in matched non-issuing firms, it is documented that domestic institutions significantly increase their shareholdings in RO firms, whereas foreign investors decrease their holdings in these firms. A positive (negative) association between the 6 month benchmark adjusted return following the offering and the change in shareholdings by foreign investors (domestic institutional investors) is also documented. Finally, the fifth and last essay investigates how Swedish owner-managers (CEO or Chairman) invest in the Swedish stock market conditional on a major investment in their own firm. No evidence is found that owner-managers seek diversification benefits when they invest in other Swedish stocks. In general, they choose other stocks that show higher correlation among themselves than the average Swedish stocks. It is also found that owner-managers within high-tech industries invest significantly more of their total Swedish stock investments in IT stocks than owner-managers within other industries. / <p>QC 20130515</p>

Submitted by Rodrigo Gandara Donini (rodrigo_donini@hotmail.com) on 2017-07-14T13:47:18Z No. of bitstreams: 1 Rodrigo Donini - MSc Dissertation - SEO and R&D (final).pdf: 2015777 bytes, checksum: 7869c46f1444bbb7df5bf39a1e063107 (MD5) / Approved for entry into archive by ÁUREA CORRÊA DA FONSECA CORRÊA DA FONSECA (aurea.fonseca@fgv.br) on 2017-07-14T15:22:41Z (GMT) No. of bitstreams: 1 Rodrigo Donini - MSc Dissertation - SEO and R&D (final).pdf: 2015777 bytes, checksum: 7869c46f1444bbb7df5bf39a1e063107 (MD5) / Made available in DSpace on 2017-07-20T19:48:07Z (GMT). No. of bitstreams: 1 Rodrigo Donini - MSc Dissertation - SEO and R&D (final).pdf: 2015777 bytes, checksum: 7869c46f1444bbb7df5bf39a1e063107 (MD5) Previous issue date: 2017-06-14 / Building on previous research that discuss the role of the government in innovation (Mahmood & Rufin, 2005), and previous empirical research about the firm-level implications of having the state as a shareholder (Inoue, Lazzarini & Musacchio, 2013; Xu & Zhang, 2008; Zhou, Gao & Zhao, 2016), this study sheds light on the relationship between state equity ownership and the R&D expenses of the firms. Results of dynamic panel data models using a database of 5,042 firms from 63 countries and 67 industries, for the years 2010 to 2016, indicate that state equity ownership is positively associated with the R&D expenses of the firms. A 1% increase in state equity ownership is associated with a US$0.814 million increase in R&D expenses. The main contributions are empirical, given the cross-country and cross-industry nature of the database, and the novel measure for state equity ownership which is a sum of the participation of any type of state-run institution, instead of just the participation of the local government or the host government. The findings have implications for state-run institutions, for instance, in the sense that they give more resources for policy makers to decide how to foster innovation more efficiently, and also implications for firms since it gives more resources for managers to decide the most efficient way to execute innovative projects. / Com base em pesquisa que discute o papel do governo na inovação (Mahmood & Rufin, 2005) e pesquisas empíricas sobre implicações de ter o Estado como acionista nas empresas (Inoue, Lazzarini & Musacchio, 2013; Xu & Zhang, 2008; Zhou, Gao & Zhao, 2016), este estudo lança luz sobre a relação entre a participação societária estatal e os gastos em P&D das empresas. Resultados de modelos de painel dinâmico usando uma base de dados de 5.042 empresas de 63 países e de 67 setores, para os anos de 2010 a 2016, indicam que a participação societária estatal está positivamente associada com os gastos em P&D das empresas. Um aumento de 1% na participação societária estatal está associado a um aumento de US$0,814 milhão nos gastos em P&D. As principais contribuições são empíricas, dada a abrangência internacional e intersetorial da base de dados, além da nova medida de participação societária estatal, que é a soma da participação de qualquer tipo de instituição estatal, e não apenas a participação do governo local ou do governo anfitrião nas empresas. Os resultados têm implicações para instituições estatais, por exemplo, no sentido de prover mais informações para que os gestores públicos possam formular políticas de fomento à inovação mais eficientes, e também implicações para as empresas, uma vez que também disponibiliza mais informações para que os gestores possam decidir a maneira mais eficiente de implementar projetos inovadores.