ABSTRACT MANAGERIAL INCENTIVES AND TAKEOVER WEALTH GAINS By EBRU REIS DECEMBER 5, 2006 Committee Chair: Dr. Jayant R. Kale Major Department: Finance This study examines the relationship between managerial equity incentives and takeover wealth gains both for target and acquirer firms. Although there is some research about the effect of acquirer managers’ incentives on acquirer wealth gains, this paper is one of the first to investigate the effect of target managers’ incentives on the wealth effects of target firms in corporate takeovers. In addition, prior research has focused on the alignment effect of equity incentives in takeovers. However, takeovers provide an opportunity to liquidate personal equity portfolio for managers who hold an undiversified portfolio of their firms’ stock. In this study, I identify two hypotheses that potentially explain the effect of target managers’ incentives on wealth gains. While incentive alignment hypothesis predicts a positive relationship, diversification driven-liquidity hypothesis predicts a negative relationship between target managerial incentives and target wealth gains. I use a sample of 656 successful and 104 failed acquisitions over the period 1994-2003 to test these competing hypotheses. I find that for targets that are less (more) diversified, equity incentives are negatively (positively) related to wealth effects. I also find that the target managerial incentives increase the success probability of a takeover bid and this positive effect is less pronounced for diversified target managers. Based on these results, I conclude that incentive alignment argument is dominated by liquidity argument in less diversified target firms, however, holds in diversified firms. For acquirer managers, I do not find any evidence that supports incentive alignment or diversification arguments.

The promotion of Small, Medium and Micro enterprises (SMMEs) has been identified as key strategy of government for employment creation and income generation. For some time now small business owners had to fend for themselves. Small business was neglected and was in the main ignored by government. Since the 1994 democratic process the challenge for the new order has been to create an enabling environment for the small business sector of the economy. The historical neglect and the consequent policy vacuum has had to be re assessed. To this end the 1995 White Paper on a National Strategy for the development and Promotion of Small Business in South Africa was the first major effort by government to design a policy framework targeting the small business sector. The promulgation of the Small Business Act in 1996 and the establishment of the Ntsika Enterprise Promotion agency under the aegis of the Department of Trade and Industry has attempted to provide direction and facilitate the provision of Non Financial support to the Small Business Sector. Various incentive schemes have been developed and put into operation together with a range of tax incentives to help promote Small Business. Eight years have passed since the promulgation of the Small Business Act and the perception that finance for SMMEs has been the greatest stumbling block to development. However the failure of the vast numbers of micro lending agencies have revealed that low levels of entrepreneurship has led to their demise. The provision of meaningful positive incentives need to be measured and their effectiveness needs to be tested. This study will try and identify the incentives available. / Thesis (M.Com.)-University of KwaZulu-Natal, 2004.

In the past decade, public scrutiny surrounding rising levels of executive compensation has led to more stringent independence requirements for compensation committees. However, there is little research studying the effects of compensation committees on executive pay from the time these new requirements were implemented. My paper studies the effects of compensation committee chair personal ties to the CEO, economic interests, and group committee characteristics on both the level and structure of CEO compensation. My findings suggest that certain committee chair personal ties to the CEO are associated with both a higher level of CEO compensation and a higher percentage of CEO salary compensation. I also find that the more compensation committee chairs are paid, the less likely they are to create CEO pay plans with strong incentive provisions, but the more likely they are to increase the level of total CEO compensation. The higher the committee chair’s ownership percentage is in the company, the less likely they are to create low-risk CEO pay plans, and the more likely they are to increase the level of total CEO compensation.

The aim of this thesis is to investigate the structure and the effectiveness of the investment incentive system in Turkey. The theoretical definition and the economic and social targets of incentives, and the direction, problems and the effectiveness of the investment incentive system are investigated. This study finds that the most prominent target of investment incentives is to alleviate the unemployment problem in Turkey. The regional investment incentives seem to be successful in the western part of the country to some extent. The investment incentive system does not seem to be successful in directing the investment to underdeveloped regions of the country. The investment incentive system has no strong effects on directing the sectoral distribution of investments.

Comparability is a desirable qualitative characteristic of financial information and critical for financial statement users' ability to identify and understand similarities and differences in financial results among reporting entities. Yet, little research explicitly considers either the determinants or benefits of comparability because of difficulty in identifying and measuring the theoretical construct of comparability. Further, the widespread global adoption of IFRS, a relatively homogenous set of accounting standards, is expected to increase comparability among companies that operate in different national jurisdictions. However, prior studies that examine the average impact of mandatory IFRS adoption on comparability find mixed results. I hypothesized that the impact of mandatory IFRS adoption on comparability varies with managers' reporting incentives and differences between countries' domestic standards and IFRS. Using listed firms from 34 countries, I documented that comparability under non-IFRS domestic standards is higher in countries that provide strong reporting incentives (i.e. countries with strict enforcement regimes or high earnings transparency). Additionally, I found an increase in comparability following IFRS adoption (relative to a control sample of non-adopters) in countries that provide strong reporting incentives or with large domestic GAAP-IFRS differences. In contrast, I found evidence of a decrease following IFRS adoption (relative to a control sample of non-adopters) in countries with weak reporting incentives or with small domestic GAAP-IFRS differences. Finally, I showed that changes in comparability surrounding adoption are positively associated with changes in the quality of firms' information environments.

Thesis (MBus)--University of South Australia, 1994

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