I analyze the effect of various risks faced by commercial banks on the executive compensation in banking industry. Commercial bank executives are risk averse due to the regulatory pressure in addition to board governance mechanism. Commercial banks face various risks because of the regulatory mechanism and unique asset structure of the firm. So, it is expected that they should associate their own pay and pay-performance sensitivities (PPS) with the risks their banks face. I find that bank executives associate their performance based pay with both idiosyncratic risk and systematic risk. But they associate their fixed pay only with systematic risk. The risk based PPS is also affected by the idiosyncratic risk but not by the systematic risk. Both asset return risk and insolvency risk have significant positive effect on PPS. Bank executives put significantly higher emphasis on the fixed compensation in terms of salary and bonus, and significantly lower emphasis on the performance based compensation. They also put minimum emphasis on the risk based PPS although they put significant emphasis on return based PPS. These indicate the risk-averse nature of the bank executives due to the regulatory pressure in addition to board governance mechanism.

This study considers the determination of the ex ante pay-performance relationship. A single-period partial equilibrium model is used to show that the executive income can be expressed as a function of the firm's return expressed in dollar terms. The executive income is jointly determined by the opening firm size and current return, which function as a managerial talent proxy and self-selection mechanism respectively. Comparing to Jensen and Murphy (1990) wealth-based Pay-Performance Sensitivity (PPS), this research presents an income-based PPS. The alternative PPS not only overcomes a misleading misspecification in Jensen and Murphy (1990), but also corrects Rosen's (1992) argument for only including return in the pay performance relationship. This research finds empirically that both the opening firm size and stock return play a significant role in determining executive income. This study provides supplementary evidence to Murphy's (1986) Learning Model. However, shareholder income may not be an ideal performance measure in capturing the multi-period pay-performance relationship.

This study examines the existence of pay-performance sensitivity in total compensation and bonus during the financial crisis, using data between 2007-2010 from Swedish 196 listed firms. We perform panel data regression analysis of CEO compensation on financial performance measured as stock returns. Our results indicate that there is, although not significant, a weak positive relationship between CEO compensation and firm performance during 2007-2010. However during 2009-2010 in a market state defined as post-crisis we find weak negative pay-performance sensitivity at a significance level of 10 %. Nevertheless, as regards to the bonus paid to executives there was a significantly positive relationship relative bonus % and firm performance. These results contribute to our understanding of the pay-performance sensitivity in times of financial disturbance, highly relevant to the existing debate considering CEO compensation.

Magister Commercii - MCom / As a result of high economic inequality, widespread discontent with excessive chief executive officer (CEO) compensation levels is acute in South Africa (SA). Some commentators argue that instead of high levels of CEO pay causing inequality, it may be part of the solution if higher levels of CEO compensation translate into better company performance, so reducing unemployment. International studies investigating the relationship between CEO short-term cash compensation and current company performance generally report a weak or no relationship where accounting based measures of performance are used. Developments in the international literature reflect a stronger relationship when long-term incentive compensation (LIC) is included and total shareholder return (TSR) used to measure company performance. However, a concerning negative association between the highest paid CEOs in terms of excess LIC and future abnormal TSR is reported. In contrast, SA pay-performance research is largely not reflective of the developments in the international literature, with local studies mostly finding no pay-performance relationship, except where size-related accounting measures are used. As a result of the strong correlation between CEO pay and company size reported in the international literature, and local studies not adequately controlling for company size, the accuracy of the conclusions drawn in prior studies on the pay-performance sensitivity relationship in SA are brought into question. This study addresses the gaps in the SA literature by investigating the relationship between the size-adjusted excess CEO compensation and future abnormal TSR for the top 100 SA companies listed on the Johannesburg Stock Exchange for the period 2011 to 2013. A positive relationship is found between future abnormal TSR and short-term cash compensation, but not LIC. The levels and structure of CEO compensation in SA is also described.

<p>This dissertation explores the role of executive compensation in determining the capital structure decisions of a firm. CEOs experience a large personal cost of default that interacts through the risk adjusted probability of default with their compensation contract. Since default happens in a particularly costly state of the world for a CEO whose compensation contract consists primarily of pay for performance elements, i.e. a CEO who has a large personal equity stake in the firm, a large pay performance sensitivity is negatively and significantly associated with firm leverage choice. I document this effect in detail for the first time, and I show that it is both statistically robust and significant in magnitude, approximately 1\% of firm value. I show that this effect is driven by the stock holdings of the CEO, not the option holdings. I provide a simple principal agent model that explains the observed negative relationship and makes additional predictions on the relationship of other firm characteristics to pay performance sensitivity and leverage. I then test and confirm these predictions empirically using a standard OLS framework and an instrumental variable approach to control for endogeneity in the compensation contract. I also look at leverage adjustment speeds and show that CEOs with higher pay performance sensitivity adjust leverage upwards towards target values more slowly and downwards more quickly than their peers, and I interpret this as direct evidence that CEOs are actively managing personal risk through firm leverage choice.</p> / Dissertation

本研究主要針對影響董監酬勞與會計(市場)績效關聯性之因素進行探討。在現代公司之經營管理架構中，係由股東在股東大會選出代表進入董事會，由董事會成員選出主要執行業務經營之人，並代理所有投資人監督及管理經營層。換言之，相對於經理人，董事會成員為股東最為直接之代理人。因此，本研究認為董事會成員為外部股東最直接之代理人，故以董監酬勞為分析對象，從公司治理之角度，以股權結構(如是屬於家族控制企業、董監持股、外部大股東持股等)及董事會特性(獨立董監席次比率、董事是否兼任經理人、董事長是否兼任總經理)等相關變數，探討其對於董監酬勞與會計、市場績效間關聯性之影響。 實證結果顯示，家族企業與公司經理人兼任董事會職位時，會提升董監酬勞與績效間之關聯性；董監持股比例愈高、外部大股東持股比例愈高、獨立董監席次比例越高及董事長兼任總經理時，會降低董監酬勞與績效間之關聯性。 / This study argues that members of corporate boards are the most direct delegate of external shareholders. Agency problem may exist between board members and external shareholders. Using a sample of firms listed in Taiwan Securities Exchange Corporation and Gre Tai Securities Market over 1996-2005, this study empirically examines the effect of ownership and board structures on the compensation of board members. This study expects that the pay-performance sensitivity of board compensation is weakened when a strong monitoring mechanism is in place. Using return on assets as the measures for performance, the primary empirical results show that family-controlled firms and firms with representation of executive directors illustrate higher pay-performance sensitivity. On the contrary, firms with higher shareholdings by board members and by outside block holders, and firms with representation of independent board members demonstrate lower pay-performance sensitivity.

Submitted by Paula Florência Almeida de Amorim Gomes (contabilista.paula@gmail.com) on 2018-04-25T02:19:04Z No. of bitstreams: 2 A RELAÇÃO ENTRE CONSERVADORISMO CONTÁBIL E PAY-PERFORMANCE SENSITIVITY EVIDÊNCIAS DO MERCADO BRASILEIRO.PAULA AMORIM GOMES.pdf: 1699379 bytes, checksum: 7fbe80fd1e732bf3cac807e0f2b55c8d (MD5) A RELAÇÃO ENTRE CONSERVADORISMO CONTÁBIL E PAY-PERFORMANCE SENSITIVITY EVIDÊNCIAS DO MERCADO BRASILEIRO.PAULA AMORIM GOMES.pdf: 1699379 bytes, checksum: 7fbe80fd1e732bf3cac807e0f2b55c8d (MD5) / Approved for entry into archive by Marivalda Araujo (masilva@ufba.br) on 2018-04-25T14:34:51Z (GMT) No. of bitstreams: 2 A RELAÇÃO ENTRE CONSERVADORISMO CONTÁBIL E PAY-PERFORMANCE SENSITIVITY EVIDÊNCIAS DO MERCADO BRASILEIRO.PAULA AMORIM GOMES.pdf: 1699379 bytes, checksum: 7fbe80fd1e732bf3cac807e0f2b55c8d (MD5) A RELAÇÃO ENTRE CONSERVADORISMO CONTÁBIL E PAY-PERFORMANCE SENSITIVITY EVIDÊNCIAS DO MERCADO BRASILEIRO.PAULA AMORIM GOMES.pdf: 1699379 bytes, checksum: 7fbe80fd1e732bf3cac807e0f2b55c8d (MD5) / Made available in DSpace on 2018-04-25T14:34:51Z (GMT). No. of bitstreams: 2 A RELAÇÃO ENTRE CONSERVADORISMO CONTÁBIL E PAY-PERFORMANCE SENSITIVITY EVIDÊNCIAS DO MERCADO BRASILEIRO.PAULA AMORIM GOMES.pdf: 1699379 bytes, checksum: 7fbe80fd1e732bf3cac807e0f2b55c8d (MD5) A RELAÇÃO ENTRE CONSERVADORISMO CONTÁBIL E PAY-PERFORMANCE SENSITIVITY EVIDÊNCIAS DO MERCADO BRASILEIRO.PAULA AMORIM GOMES.pdf: 1699379 bytes, checksum: 7fbe80fd1e732bf3cac807e0f2b55c8d (MD5) / Fundação de Amparo à Pesquisa do Estado da Bahia - FAPESB / Um conjunto de estudos recentes aponta a relevância do conservadorismo contábil na formulação de contratos de incentivo aos executivos. As evidências de fortes correlações entre conservadorismo contábil e os indicadores de pay-performance sensitivity corroboram com a ideia de que o conservadorismo contábil é demandado pelas empresas como um meio de lidar com problemas de conflitos de agência, tais como como a miopia gerencial e o gerenciamento de resultados. Neste sentido, o presente estudo investiga a correlação entre o conservadorismo contábil condicional e a pay-performance sensitivity nas empresas que vinculam formalmente a remuneração variável de seus executivos ao desempenho contábil. A amostra contém 474 observações referentes a 131 empresas listadas na BMF&Bovespa, no período de 2011 a 2016. Para atingir o objetivo proposto, foi empregada uma regressão com dados em painel por meio de um modelo empírico que captura a relação entre o conservadorismo contábil e a pay-performance sensitivity. As variáveis do estudo foram extraídas dos dados da remuneração de executivos e das demonstrações contábeis destas empresas que são divulgados no Formulário de Referência e no Economática®, respectivamente. Os resultados da pesquisa indicam que as empresas brasileiras que fornecem incentivos de curto prazo aos seus executivos não apresentam relação entre o conservadorismo contábil condicional e a pay-performance sensitivity. Complementarmente, foram realizados testes adicionais empregando-se outras medidas de desempenho contábil no modelo de regressão, uma análise da pay-performance sensitivity por meio do modelo de Jensen e Murphy (1990) e uma análise do conservadorismo condicional da amostra, através do modelo de Basu (1997). Os resultados são robustos para diferentes indicadores de desempenho contábil, como retorno sobre os ativos – ROA e retorno sobre o patrimônio líquido - ROE, mesmo submetendo-os a diversas variáveis de controle. Com a análise da pay-performance sensitivity das empresas pode-se verificar que a remuneração dos executivos não apresentou sensibilidade tanto em relação às medidas de desempenho contábil, quanto ao retorno das ações. Os resultados mostram que quanto maiores os índices de MTB (market-to-book) maior é a remuneração dos executivos. No entanto, a remuneração mostrou uma relação inversa com a alavancagem financeira e governança corporativa. Também não foi detectado nível de conservadorismo contábil que indique sua presença nas demonstrações contábeis da amostra, o que sustenta os resultados encontrados para a hipótese do estudo. Portanto, pode-se perceber que mesmo com o uso generalizado de pagamento de bônus e participações e das evidências de gerenciamento de resultados, as empresas brasileiras não apresentam o conservadorismo contábil como mecanismo de monitoramento de seus contratos de incentivo, expondo-as aos riscos de oportunismo gerencial, contabilidade agressiva, e redução da qualidade da informação dos relatórios financeiros. Diante deste ambiente institucional, estas evidências podem indicar um alerta para os órgãos reguladores de normas contábeis e para as empresas do mercado brasileiro com relação à necessidade de se implantar mecanismos de eficiência contratual, como o conservadorismo contábil, no desenho de contratos de incentivo mais eficientes e equilibrados. / A number of recent studies point to the relevance of accounting conservatism in the formulation of incentive contracts to executives. Evidence of strong correlations between accounting conservatism and pay-performance sensitivity indicators corroborates the idea that accounting conservatism is demanded by firms as a means of dealing with problems of agency conflicts such as ex post settling up problem and management earnings. In this sense, the present study investigates the correlation between conditional accounting conservatism and pay-performance sensitivity for companies that formally based variable remuneration of their executives to accounting performance. The sample contains 474 observations referring to 131 companies listed on the BMF & Bovespa between 2011 and 2016. To achieve the proposed objective, a regression with panel data was employed through an empirical model that captures the relationship between accounting conservatism and pay-performance sensitivity. The study variables were extracted from the executive compensation data and the financial statements of these companies that are disclosed in the Form 20F and Economática®, respectively. The results of the research indicate that Brazilian companies that provide short-term incentives plans to their executives have no relation between conditional accounting conservatism and pay-performance sensitivity. In addition, additional tests were performed using other measures of accounting performance in the regression model, a performance-based pay-sensitivity analysis using the model of Jensen and Murphy (1990) and an analysis of conditional conservatism of the sample, using the model of Basu (1997). The results are robust for different accounting performance indicators, such as return on assets - ROA and return on equity - ROE, even by subjecting them to several control variables. With the analysis of the pay-performance sensitivity of the companies, it can be verified that the executives' compensation was not sensitive both to the measures of accounting performance and to the return of shares. The results show that the higher the MTB (market-to-book) indices the higher the executive compensation. However, the remuneration showed an inverse relationship with financial leverage and corporate governance. We also did not detect degrees of accounting conservatism that indicate its presence in the financial statements of the sample, which supports the results found for the hypothesis of the study. Therefore, it can be seen that, even with the generalized use of bonuses and participations and evidence of results management, Brazilian companies do not present accounting conservatism as a mechanism for monitoring their incentive contracts, exposing them to risks managerial opportunism, aggressive accounting, and reduced quality of financial reporting. In view of this institutional environment, this evidence may indicate an alert for accounting standards regulators and companies in the Brazilian market, regarding the need to implement contractual efficiency mechanisms, such as accounting conservatism, for the design of incentive contracts more efficient and balanced.

Orientation: CEO remuneration has attracted attention over the past two decades, with significant renewed interest in light of the role it is said to have played in contributing to the global financial crisis. At the heart of the issue is the perceived weak relationship between corporate performance and CEO remuneration.Research purpose: The purpose of this study was to describe the relationship between corporate performance and CEO remuneration within the South African financial services industry.Motivation for the study: The motivation for the study was to develop a deeper understanding of the relationship within the South African context, as South African banks have remained stable and profitable through the financial crisis.Research design approach and method: The research was a quantitative, archival study, conducted over a six year time period. The primary statistical techniques used in the study included: bivariate regression analysis, multiple regression analysis, and analysis of variance.Main findings/results: The primary finding was that the relationship between corporate performance and CEO remuneration is favourable (moderate to strong), but has experienced a decline. This finding emphasises the impact that macroeconomic trends have on the relationship and the role of managerial power during periods of economic uncertainty.The research further describes the structural changes in CEO remuneration with a shift away from variable pay.Practical managerial implications: The results suggest that the use of discretion and the growing impact of managerial power will be key challenges that iii remuneration committees will face in maintaining a favourable relationship between the two constructs in the future.Contribution/value add: The study provides context to CEO remuneration within a South African framework. It further provides provides a key insight that the relationship between corporate performance and CEO pay is highly dependent on the macroeconomic environment, and that CEO pay in the South African financial services is experiencing structural changes. / Dissertation (MBA)--University of Pretoria, 2012. / Gordon Institute of Business Science (GIBS) / unrestricted

This thesis aims to examine what impact the Covid-19 pandemic has on the pay-performance relationship. This study performs an OLS regression analysis of total CEO compensation on accounting and market-based firm performance for 2017-2020 using 233 Swedish listed firms. The results could not find a positive relationship between total CEO compensation and firm performance during 2017-2020. The findings rather indicate that Swedish CEOs are rewarded for failure. Moreover, the results could not find support for a weaker pay-performance sensitivity. These results contribute to the existing research by giving insights into the effects of financial distress on the pay-performance relationship in Sweden.

本研究主要針對影響高階經理人酬勞與盈餘品質關聯性之因素進行探討。當會計績效指標在薪酬契約中的角色因為過度的操弄而受到爭議時，公司管理當局是否會為了緩和經理人的短視行為，而加入盈餘品質的考慮因素，調整會計績效指標於薪酬契約中的重要性。另外本研究從公司治理之角度，以股權結構(機構投資人持股、外部大股東持股、董監事持股持押比例、經理人是否同時為董事會成員、董事長是否兼任總經理與股份盈餘偏離倍數)相關變數，探討其對於高階經理人酬勞與盈餘品質間關聯性之影響。 實證結果顯示，外部大股東持股比例越多，對於高階經理人酬勞與盈餘品質間的關聯性越重視；而經理人同時擔任董事會成員、董事長兼任總經理與股份盈餘偏離倍數越大的公司，會降低高階經理人酬勞與盈餘品質間的關聯性。