15,008 research outputs found
Origin of CEO and Compensation Strategy: Differences between Insiders and Outsiders
Increasingly, U.S. firms are hiring their new CEOs from outside the firms. This study investigates the differences in compensation between outsider CEOs and insider CEOs from three dimensions: pay level, pay and performance link, and pay mix. Our analyses show: (1) outsider CEOs are paid more than insider CEOs, (2) pay and performance link is very weak for outsider CEOs, and (3) compensation package for outsider CEOs emphasizes the use of stock options. While several factors (e.g., firm size, firm performance, CEO tenure, ownership structure) influence insider CEOs\u27 pay, firm size is the only determinant of outsider CEOs\u27 pay. Our results suggest we will be able to understand CEO compensation more accurately if we analyze CEOs from different origins (insiders, outsiders, founders) separately
Board of Directors Monitoring of CEO Insider Trading: Before and After the Sarbanes-Oxley Act
This study investigates the impact monitoring by the board of directors had on the incidence of insider trading by firm chief executive officers (CEO) and on the abnormal returns they realized from 1996 to 2008. The study also analyzes the impact the Sarbanes-Oxley Act of 2002 (SOX) had on this relationship. The results show that CEOs earned significant abnormal returns on their buy and sell trades during this period. Furthermore, the results show that internal governance mechanisms such as board independence and CEO/Chairman duality reduce abnormal return and the intensity of CEOs\u27 insider trades. The results are particularly significant for trades with more significant underlying nonpublic information. The results also show that SOX significantly reduced the abnormal returns and the intensity of CEOsâ insider trades. The results show that SOX weakened the impact of board independence in mitigating CEOs\u27 insider trades, while it increased the impact of the CEO/chairman duality. The results indicate that internal governance mechanisms generally have more pronounced impact on sell trades than on buy trades
Exploring the relationship between CEO characteristics and performance
This article examines the relationship between CEO characteristics and firm performance with a sample formed by the best performing CEOs in the world according to Harvard Business Review. The empirical analysis is based on descriptive statistics techniques and studies the universe of CEOs included in the 2016 ranking "The Best-Performing CEOs in the World" released by Harvard Business Review. Moreover, it addresses performance at various levels: financial performance, environmental, social and governance performance (ESG) and overall performance. The findings of the study show: 1) a strongly negative association between financial and ESG performance; 2) outsider CEOs outperform insider CEOs in overall performance; 3) CEOs with engineering degrees show significantly higher ESG performance; 4) CEOs with longer tenures in the firm present stronger financial performance though weaker ESG performance; and 5) the CEO's country of origin emerges as an important driver to explain the different types of performance. Results in this field contradict the conventional wisdom of Anglo-Saxon CEOs as the best performers CEOs
Network centrality, connections, and social capital: Evidence from CEO insider trading gains
Chief executive officer\u27s (CEO\u27s) insider trading gains are affected by the position of the CEO within the hierarchy of all executives, as assessed by network centrality. CEOs with high centrality earn superior abnormal returns following their company\u27s stock purchases, consistent with social capital advantage. Social capital and trading gains are positively associated primarily in firms that are riskier, have weak governance, or are managed by CEOs with no background in finance. Highâcentrality CEOs also gain by selling their shares prior to a bad news event experienced by their firm. Finally, trading gains are positively affected by CEOs having past connections to the chief financial officers
Insider Data Breach and CEO Apology (or Denial): Does CEO Gender Impact Trust Restoration?
This study examined the effect of CEO gender and intervention type on post-violation trust restoration in the event of an insider data breach. The results show that the insider breach event causes usersâ trust to decline significantly. We also found that regardless of gender, CEO apology was more effective than denial in restoring post-violation trust. While there was no significant difference between the genders in the case of an apology, we found that in the case of denial male CEOs experienced significantly higher post-violation trust than female CEOs. The findings were explained using interactional justice. The study is among the first to examine the perceived differences between male and female CEOs and the social account of apology and denial. The study also examines the comparative effect of male and female CEO responses on male and female respondents respectively. Social, managerial and theoretical implications, along with future research directions, are discussed
Insider Trading, Option Exercises and Private Benefits of Control
We investigate patterns of abnormal stock performance around insider trades and option exercises on the Dutch market. Listed firms in the Netherlands have a long tradition of employing many anti-shareholder mechanisms limiting shareholders rights. Our results imply that insider transactions are more profitable at firms where shareholder rights are not restricted by antishareholder mechanisms. This finding goes against the monitoring hypothesis which states that more shareholder orientation and stronger blockholders would reduce the gains from insider trading. We show robust support for the substitution hypothesis as insiders of firms which effectively curtail shareholder rights enjoy valuable private benefits of control in lieu of engaging in insider trading to exploit their position.insider trading, management stock options, timing by insiders, corporate governance, antishareholder mechanisms, anti-takeover mechanisms
Executive compensation and the susceptibility of firms to hostile takeovers : An empirical investigation of the U.S. oil industry
We investigate the suggested substitutive relation between executive compensation and the disciplinary threat of takeover imposed by the market for corporate control. We complement other empirical studies on managerial compensation and corporate control mechanisms in three distinct ways. First, we concentrate on firms in the oil industry for which agency problems were especially severe in the 1980s. Due to the extensive generation of excess cash flow, product and factor market discipline was ineffective. Second, we obtain a unique data set drawn directly from proxy statements which accounts not only for salary and bonus but for the value of all stock-market based compensation held in the portfolio of a CEO. Our data set consists of 51 firms in the U.S. oil industry from 1977 to 1994. Third, we employ ex ante measures of the threat of takeover at the individual firm level which are superior to ex post measures like actual takeover occurrence or past incidence of takeovers in an industry. Results show that annual compensation and, to a much higher degree, stock-based managerial compensation increase after a firm becomes protected from a hostile takeover. However, clear-cut evidence that CEOs of protected firms receive higher compensation than those of firms considered susceptible to a takeover cannot be found
Career Concerns of Top Executives, Managerial Ownership and CEO Succession
We model the portfolio decisions by managers with career concerns in a context where ownership of the firm's stock can affect the outcome of promotion contests. In addition to their utility from wealth, such managers derive utility from the monetary and non-monetary benefits (prestige) of running a corporation. Our theory predicts that top managers competing for the CEO position will distort their investment decisions away from the optimum portfolio choice in the absence of career concerns. Thus, our model suggests that changing career opportunities can explain portfolio decisions by managers and that insider ownership can help explain the outcomes of promotion contests. Our main testable predictions are that higher ownership by insiders increases their chances of being appointed CEO; that lower ownership by inside managers makes outside CEO appointments more likely; and that a lower probability of CEO turnover (and thus reduced promotion opportunities) leads inside managers to reduce their ownership in the firm and/or to leave the company. Using data on managerial ownership surrounding CEO turnover events, we find evidence supporting the predictions of our model. Overall, our main insight is that insider ownership, the outcome of promotion contests, the choice between inside and outside CEO replacements, and executive departure decisions are all related. Nous dĂ©veloppons un modĂšle de choix de portefeuille des gestionnaires dans un environnement oĂč leurs chances d'ĂȘtre promu PDG sont liĂ©es Ă leur actionnariat dans l'entreprise. Puisque les gestionnaires valorisent leur nomination potentielle au rang de PDG, nous prĂ©disons que leur choix de portefeuille sera biaisĂ© par rapport au choix qu'ils auraient fait en l'absence d'anticipations carriĂ©ristes. Notre modĂšle prĂ©dit que des changements dans les chances d'ĂȘtre promu expliquent les choix de portefeuille des gestionnaires. En particulier, nous montrons empiriquement qu'un plus grand actionnariat augmente la chance d'ĂȘtre promu au rang de PDG, rĂ©duit la chance qu'un gestionnaire externe Ă l'entreprise soit nommĂ©. De plus, une rĂ©duction dans la possibilitĂ© d'ĂȘtre promu rĂ©duit l'actionnariat des gestionnaires ou induit leur dĂ©part. Nous testons les hypothĂšses dĂ©coulant du modĂšle en utilisant les changements dans l'actionnariat des gestionnaire lors de la dĂ©mission du PDG. Les hypothĂšses importantes du modĂšle sont confirmĂ©es.managerial compensation, CEO succession, corporate tournament, portfolio allocation, rĂ©munĂ©ration des dirigeants, changement de PDG, tournoi corporatif, choix de portefeuille
The Discreet Trader
This paper examines insider trading, specifically trades by corporate insiders around quarterly earnings announcements. Announcements were broken up into three categories: earnings above analyst expectations, earnings below expectations, and earnings in line with expectations. Trade data was collected from the thirty companies of the Dow Jones Industrial Average from 2012-â13. The trades were sorted by purchases and sales by date and analyzed with the earnings report of which the trades were made. Only trades in the interval from twenty days before the announcement date to twenty days after the announcement date were considered. The prediction was that corporate insiders would leverage their inside knowledge to delay trading until after the earnings announcement. They would benefit financially by trading after the announcement and draw less attention from the SEC, as they delayed trading until the announcement became public information. However, knowing how the market would react would allow them to make a meditated decision. For an announcement that was below analyst expectations, corporate insiders should buy stock after the market reaction causes the price to drop. Our findings were that corporate insiders did in fact wait until the announcement day and overall were net buyers. The study will give better insights into how corporate insiders trade and how restrictions can be made to stop this insider trading activity
The Managerial Labor Market and the Governance Role of Shareholder Control Structures in the UK
We simultaneously analyze two mechanisms of the managerial labor market: CEO turnover and monetary remuneration schemes.Sample selection models and hazard analyses applied to a random sample of 250 firms listed on the London Stock Exchange over a six-year pre-Cadbury period show that managerial remuneration and the termination of labor contracts play an important role in mitigating agency problems between managers and shareholders.We find that both the CEO's industry-adjusted monetary compensation and their replacement are strongly performance-sensitive.Top executive turnover is shown to serve as a disciplinary mechanism for corporate underperformance, whereas the level of monetary compensation rewards good performance.We also investigate whether specific corporate governance mechanisms (different types of blockholders or of boards of directors) have an impact on managerial disciplining or on the pay-for-performance contracts.There is little evidence of outside shareholder monitoring and CEOs with strong voting power successfully resisting replacement irrespective of corporate performance.This case of strong managerial entrenchment is even exacerbated when the CEO also holds the position of chairman of the board.In firms with large outside shareholdings, CEO compensation is lower, but outside shareholder do not impose a stricter performance-related incentive remuneration scheme.When insiders have strong voting power, the CEOs remuneration is lower except when the stock price performance is poor: it seems that when the CEOs wealth resulting from their investment goes down due to decreasing stock prices, the CEOs cash compensation is higher.The presence of a remuneration committee has no impact on remuneration.Finally, we find strong support for the incentive effect-hypothesis of remuneration: CEOs with higher levels of monetary compensation attain better subsequent accounting and stock price-based measures of corporate performance.labour turnover;agency theory;labour market;managers;corporate governance;shareholders;corporate ownership
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